We help people who need to avoid SBA loan default by teaching them about SBA offer in compromise and about various SBA loan problems such SBA Personal Guarantees
Book a Consultation CallAs we reported before on a previous blog entry, on January 1, 2014, SOP 50 10 5(F) became effective. This SBA Standard Operating Procedure (SOP) significantly alters the collateral requirements for SBA loans with regard to the types of assets that principals of borrowers must now pledge or mortgage.
Under this new SOP, principals are only required to pledge their personally owned real estate if their loan is not otherwise fully secured. In addition, there is no longer any requirement that principals pledge their publicly traded securities or other non-real estate assets.
As a practical matter, when combined with the proposed repeal of the resources test, this means that individuals and entities with substantial personal wealth may now serve as personal guarantors on SBA loans, and SBA lenders may be in a position to pursue and collect significant unsecured assets when litigating against those guarantors. Simply put, personal guarantors will have more at stake, and they will have the resources needed to secure litigation defense counsel, protect and defend their assets and possibly assert lender liability claims against their lender or bank.
Under SOP 50 10 5(F), lenders will, for the first time, have the option to use their own customized SBA personal guarantee agreements instead of using SBA Form 148 (or Form 148L), as long as their personal guarantee agreements are “equivalent” to the terms found in the SBA’s Forms.
This means that SBA lenders may be able to include clauses and terms in their personal guarantee agreements that were not previously included in the SBA’s standard forms.
However, as defense counsel for many personal guarantors of defaulted SBA Loans, it should be advised that SBA lenders should seriously reconsider taking advantage of this opportunity to craft their own personal guarantee agreements with clauses or provisions that are entirely favorable to to them at the expense of the personal guarantor as they may easily find themselves having to defend their personal guarantee agreements based on arguments of typical affirmative defenses, such as, unfairness, bad faith, breach of covenant of good faith and fair dealing, contract of adhesion, unconscionability, and/or misrepresentation.
As noted above, the anticipated changes in terms regarding personal guarantees in light of SOP 50 10 5(F) will likely become more important as lenders begin enforcing their SBA personal guarantee agreements against individuals who have sufficient personal resources to retain defense counsel and defend the claims of the lenders.
The landscape between SBA personal guarantors of defaulted SBA loans and purportedly aggrieved lenders or banks has changed dramatically. Both parties should be apprised of this new frontier and get ready to rumble.
The attorneys in our office want to help you figure out your SBA or DOT situation. No matter how difficult your circumstances may seem, the right lawyer can assist you. We understand that you probably have questions regarding a wide range of issues, including how to respond to an SBA or DOT demand letter, what SBA loan foreclosure actually entails, and what a tax offset program is. One of our specialists can tell you about all of these topics and more. We urge you to read our blog to learn more about subjects that are confusing to you and to contact us right away if you have specific questions. We look forward to working with you during this period of your life.
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 executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
Clients personally guaranteed SBA 7(a) loan balance of over $300,000. Clients also pledged their homes as additional collateral. SBA OIC accepted $87,000 with the full lien release against the home.
Client personally guaranteed SBA 7(a) loan for $150,000. COVID-19 caused the business to fail, and the loan went into default with a balance of $133,000. Client initially hired a non-attorney consultant to negotiate an OIC. The SBA summarily rejected the ineligible OIC and the debt was referred to Treasury’sBureau of Fiscal Service for enforced collection in the debt amount of $195,000. We were hired to intervene and initiated discovery for SBA and Fiscal Service records. We were able to recall the case from Fiscal Service back to the SBA. We then negotiated a structured workout with favorable terms that saves the client approximately $198,000 over the agreed-upon workout term by waiving contractual and statutory administrative fees, collection costs, penalties, and interest.
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