SBA Has Stopped Auto-Enrollment In The Hardship Accommodation Plan for COVID EIDL Loans
SBA COVID EIDL Loan Default? Learn about HAP, OIC, Workout or Bankruptcy
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.
The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.
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.
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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