SBA Lien Release Considerations
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.
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 obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
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.
Client personally guaranteed SBA 7(a) loan balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.
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