SBA Liquidation Protocols
Article about SBA Liquidation Standard Operating Procotols, SBA liquidation procedures, grounds for appealing violations of SBA SOPs to the SBA Office of Hearings and Appeals
Many times you may want or need to substitute collateral securing your SBA guaranteed loan. You need to follow the proper steps or risk an SBA loan default if the substitution is not approved. This video provides further information about substituting collateral.
https://youtu.be/z4bxiWrPyQ0
The collateral offered in substitution should be similar in nature (e.g., real property for real property) or provide a higher level of confidence (e.g., a certificate of deposit for an account receivable), and have a recoverable value that is equal to or greater than the recoverable value of the existing collateral based on an appraisal that meets the appraisal requirements of the SBA.
There should be no more than a nominal increase (i.e., 3.5% or less) in the amount of any proposed senior lien;
You must have a satisfactory credit history;
Your current financial statement should reflect that you have the ability to pay all of your obligations that will be outstanding after the substitution;
You should have sufficient equity in the collateral to adequately secure the SBA loan after the proposed substitution;
The release and substitution must not impair the ability to foreclose upon the remainder of the collateral or collect the loan balance; and
The release of the existing lien(s) or proceeds from the release must occur at the same time as the recording of the new lien(s) in the required position of priority and done pursuant to an escrow agreement signed by all of the parties involved in the transaction.
If your personal residence has been pledged as collateral, requests to substitute a lien on a new residence in exchange for releasing the lien on the existing residence are subject to the following additional requirements:
a. All of the proceeds from the sale of the your existing residence, other than the funds needed to pay off senior liens and necessary, reasonable and customary closing costs, must be used to purchase the new residence, placed in an escrow account to facilitate the purchase of a new residence, or used to pay down the SBA loan;
b. The amount of equity in the new residence available to secure the SBA loan must be the same as or greater than the amount of equity in the existing residence available to secure the SBA loan; The release of the existing lien, or proceeds from the release, must happen at the same time as the recording of the new lien in the required position of priority and should be done pursuant to an escrow agreement signed by all of the parties involved in the transaction; and
d. You must provide the title, hazard and flood insurance.
If you are facing an SBA loan default, contact Protect Law Group today at www.sba-attorneys.com or 1-888-756-9969 to schedule your consultation.
We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
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.
Clients obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
Clients borrowed and personally guaranteed an SBA 7(a) loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
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