SBA Loan Default: You Pledged Your Personal Residence, Now What?
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.
If you're interested in getting a business loan for your small business, there are some important do's and don'ts you'll need to keep in mind.
Book a Consultation CallSmall business loan approval rates are on the rise, and more small business owners are getting the full amount of the loan they're requesting.
If you're interested in getting a business loan for your small business, there are some important do's and don'ts you'll need to keep in mind.
These guidelines will help you make the right decisions and increase your chances of getting all the money you need to get your business off the ground.
Getting a business loan
Before diving into the specific dos and don'ts of getting a business loan, it's important to understand some of the different types of small business loans and their repayment terms
This involves receiving a lump sum of money that you will repay over a predetermined period of time with interest.
These SBA loans are guaranteed by the Small Business Administration. They typically have lower interest rates and longer repayment terms.
This gives you access to money up to a specific limit. You only pay interest on the money you've withdrawn.
As the name suggests, this type of loan is meant specifically to help you purchase the equipment you need for your business. The equipment serves as collateral for the loan.
Business credit cards are revolving lines of credit. You can draw from and repay them as often as needed. They're typically best when used for financing ongoing expenses like travel or utilities.
When it comes to seeking out a business loan for your small business, you must be sure to keep these guidelines in mind:
Small business owners who are aware of their business credit scores are 41 percent more likely to get approved when they apply for a business loan.
Your personal credit score makes a difference, too. It tells potential lenders a lot about your financial habits.
One of the easiest ways to keep your finances in check is to use a separate bank account for your business. Keeping them separate actually decreases your chances of being turned down for a loan, too.
There are lots of lenders out there. You can even find lots of online lenders with rates and repayment options that are in line with or better than the options offered by traditional banks and credit unions. Take your time and look at all the different choices before making a decision.
There are a lot of documents you'll need to have on hand when you're applying for a business loan. Some specific documents you ought to keep easily accessible include:
Carefully review what each loan requires and have that information ready to go so that you're prepared.
Many small business owners who are denied financing don't know why their applications get denied. These small business owners often tend to get turned down more than once, often because they don't learn from the mistakes they made the first time around.
There are more costs associated with a business loan than just the amount you're seeking to borrow. From interest rates to the APR, there are other costs you need to keep in mind. Use a loan calculator so that you understand the true cost of your loan before deciding whether or not it's right for you.
Finally, remember that you don't have to go through the loan application all by yourself. There's nothing wrong with taking advantage of all the resources out there and working with an expert.Â
Get in touch with someone at your local SBA office. They can put you in touch with a mentor who will give you the advice you need to increase your chances of getting approved.
At the same time, there are also some things you ought to avoid if you want to increase your chances of your loan request getting approved:
Many business owners make the mistake of only looking for loans from their local bank or credit union. Remember, there are lots of alternative lenders out there. Don't be afraid to seek them out.
No matter how optimistic you are, chances are your income is not going to be as high in your first year as you predict.
Go over your budget, then decrease your income by 25-50 percent. You'll be more likely to get approved for your loan if you're realistic.
At the same time, don't underestimate the expenses you'll be met with as you're getting your business off the ground. Go back over your budget and increase your expenses, just to be safe.Â
When you apply for a business loan, lenders will ask you how much money you want and what you're going to use it for.
Be specific about the amount you want and your intentions for that money. Don't beat around the bush -- lenders want to see that you've got a specific plan.
Finally, while there's nothing wrong with seeking out a loan from an alternative lender, it's still important to ensure that your potential lender is a reputable one. Remember, if their offer seems too good to be true, it probably is.
If you have defaulted on an SBA loan, our experienced SBA attorneys offer assertive legal representation.
We can help at Protect Law Group. Contact us today to schedule a consultation.
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’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
The clients are personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
Clients personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
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