Can a Business Loan be Forgiven if the Business Fails?
Discover key factors regarding business loan repayment obligations after a business failure. Explore SBA loan forgiveness options and consult with Protect Law Group.
SBA Help for Coronavirus Outbreak: SBA Programs Available for Small Businesses as Domino Effect Begins to Unfold within the Next 4-8 Weeks
Unfortunately, the Coronavirus (aka COVID-19) has breached our borders so prevention is no longer a viable remedy. Travel blockades and restrictions will not be effective. Now that the virus is in the U.S., the primary objective is to contain “community spread.”
There are options available to try to stem the tide and deter “community spread.” The 4 major options are discussed in an interesting Washington Post article, which can be accessed here: https://www.washingtonpost.com/graphics/2020/world/corona-simulator/?utm_source=pocket-newtab
Whatever measures are implemented, it should be noted that this public health crisis will impact our economy – definitely in the short term (hopefully, not in the long term) – as containment of “community spread’ is the only viable response at this point – especially since we will not be able to conjure up an anti-viral drug or vaccine within the next 2 months to either cure or prevent the disease. The objective is to prevent a systemic failure to our health care system, which occurred in Italy where arguably unethical decisions were made for triage purposes to care for those individuals with a better survival rate than those who’s odds are worse. This translates into discriminatory health care – a selection process that does not bode well for the elderly (age discrimination) and for minorities (race-based due to preconceived notions of underlying health conditions).
So, what is the federal government’s plan for small businesses currently or about to be affected by measures implemented to date to stem “community spread’ from the Coronavirus Outbreak?
As of March 12, 2020, President Trump proposed the following ideas:
For current small business affected by federal, state and local restrictions with SBA 504, 7(a) or Micro Loans, deferment or forbearance options may be one of your options. Information relating to deferment options are available in the following links:
SBA Information Notice 5000-20004
President Trump announced Friday, March 13, 2020, the Small Business Administration is "stacked" with money to help small businesses during the Coronavirus outbreak. See https://youtu.be/he83H_yI7RA. A national emergency has been declared, freeing up additional federal funding.
President Trump announced earlier this week his intent to help the U.S. economy during the Coronavirus outbreak by increasing SBA funding by an unprecedented $50 billion.
More information will be released as the rules are published.
On March 13, 2020, the Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R. 6074) was signed by the President and became law. The legislation provides $8.3 billion in new funding to support public health services and businesses negatively impacted by the COVID-19 outbreak. In addition to providing public health agencies with $950 million, the new appropriations are estimated to allow the SBA to provide $7 billion in loans to small businesses.
"For many American small businesses, the outbreak of coronavirus means fewer customers, gaps in supply chains, and workforce reductions," says House Small Business Committee Chairwoman, Nydia M. Velázquez. "That is why [...] the House acted to open critical economic injury loans to small businesses dealing with the consequences of the coronavirus outbreak. These low-interest loans will inject much-needed capital into Main Street businesses as they recover from the hardship of operating during a public health crisis."
"I'm grateful that this bill includes a provision [...] to deal with some of the economic impacts of this." U.S. Representative Derek Kilmer said in a press release last week. "I've already heard some export-dependent manufacturers have been negatively impacted by this situation. It's important for the federal government to have the backs of our small businesses by providing this assistance."
Review the following sources here:
H.R. 6074
The House Committee on Small Business - Press Release
SBA Disaster Loan Program
The SBA website has not yet been updated with specific information about the loans and lending plans available for coronavirus-related small business recoveries. However, it is likely that the SBA will offer the low-interest loans as part of its established Small Business Disaster Loan program.
If you are facing inevitable issues and problems with your SBA loan either with your SBA 7(A) lender, your Certified Development Corporation (CDC) regarding your SBA 504 loan or Disaster Loan (i.e., EIDL, Home or Business Disaster Loan), contact us today for a case evaluation with an experienced SBA attorney at 1-888-756-9969
We can analyze your SBA challenges, issues and problems stemming from the Coronavirus health scare and advise you on a range of potential solutions in light of the current legislation, federal rules and regulations.
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.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
Client's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement. The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.
The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.
The Firm was hired to investigate and find an alternate solution to the bankruptcy option. After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.
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.
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