Navigating SBA Loan Programs
Are you interested in learning more about the various types of SBA Loan Programs? Protect Law Group is here to keep you informed. Learn more today!
We provide people who are facing an SBA loan default with solutions. We analyze SBA loan problems and provide solutions such as an SBA offer in compromise.
Book a Consultation CallDealing with the idea that you might be facing an SBA loan default can be terrifying. The SBA attorneys in our office are skilled at helping clients understand all the facets of their situation. We will advise you as to the potential for an SBA offer in compromise. You should never face your SBA loan problems alone. It is important to retain the services of an attorney who can help you through this difficult time in your life. Please contact us for a consultation.
Structural barriers appear to be holding back bank lending to small businesses.
A long move toward consolidation of banking assets into less and less banks is denying a key source of capital for small firms. Community banks are being consolidated by big banks, with the number of community banks dropping to fewer than 7,000 today, a decrease from over 14,000 in the mid-1980s, while average bank assets continues to rise. This trend was made even greater by the financial crisis.
Additionally, the costs of borrowers and lenders matching up is very high. It is difficult for qualified borrowers to find willing lenders, and vice versa. Federal Reserve research finds that small-business borrowers can spend almost 25 hours on paperwork for bank loans, and are often submitting applications to multiple banks. Successful applicants wait weeks or, in some cases, a month or more for the funds to actually be approved and made available.
Furthermore, small-business loans, usually loans below $1 million, are considerably less profitable than large business loans for several reasons, including: Small-business lending is riskier than large-business lending. Small businesses are much more sensitive to swings in the economy, have higher failure rates, and fewer assets to collateralize.
Determining creditworthiness of small businesses can be hard due to a lack of transparent information. Little, if any, public information exists about the performance of most small businesses as they are not subject to disclosure and securities laws like larger borrowers. Many small businesses also fail to keep detailed balance sheets, use bare bones tax returns, and keep insufficient income statements. Community banks have historically placed more importance on relationships with borrowers in their underwriting processes, but these relationships are expensive and have not in the past translated well to automated methods for assessing creditworthiness, which are favored by larger banks.
Transaction costs to process a $100,000 loan are similar to a $1 million loan, but with less profit. As a result, banks are less likely to do business lending at the smallest dollar level. Some banks, particularly larger banks, have significantly reduced or eliminated loans below a certain threshold, typically $100,000 or $250,000, or simply will not lend to small businesses with revenue of less than $2 million, as a way to limit time-consuming applications from small businesses. This creates a problem in the market as over half of small businesses are believed to be looking for loans of under $100,000, leaving a large gap in the small business loan market. Often times, the biggest banks refer small businesses below such revenue thresholds or seeking such low dollar loans to their small business credit card products, which earn higher yields.
As the economy chugs along in its slow recovery from the recession, it appears unlikely that all the barriers to bank lending to small business will disappear. If you are in danger of falling into an SBA loan default, please contact us for a case evaluation.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Our firm successfully assisted a client in closing an SBA Disaster Loan tied to a COVID-19 Economic Injury Disaster Loan (EIDL). The borrower obtained an EIDL loan of $153,800, but due to the prolonged economic impact of the COVID-19 pandemic, the business was unable to recover and ultimately closed.
As part of the business closure review and audit, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability for the owner/officer.
This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA Offer in Compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.
Client personally guaranteed SBA 7(a) loan balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.