With the meltdown of SVB and Signature banks and other banks teetering it may affect SBA loans in the future and current loans as well.
Book a Consultation Call
With the meltdown of SVB and Signature banks and other banks teetering it may affect SBA loans in the future and current loans as well.
The current banking crisis can have a significant impact on Small Business Administration (SBA) loans. The SBA is a government agency that provides support to small businesses by offering loans, loan guarantees, and other financial assistance programs. However, SBA loans are typically provided by private banks and other financial institutions that partner with the agency.
If these banks are struggling due to the banking crisis, they may become more hesitant to lend money, including SBA loans, to small businesses. This can result in a reduction in the availability of SBA loans, making it more difficult for small businesses to access the capital they need to survive and grow.
Additionally, the economic downturn caused by the banking crisis may cause some small businesses to default on their existing SBA loans.This could lead to a decrease in the SBA's loan portfolio and an increase in the agency's loan guarantee payments to banks.
Overall, the banking crisis can have a negative impact on the availability and affordability of SBA loans, making it more challenging for small businesses to obtain the funding they need to succeed.
Higher interest rates may have several effects on SmallBusiness Administration (SBA) loans:
· Increase in borrowing costs: Higher interest rates mean that borrowers will have to pay more to borrow money, which will increase the overall cost of SBA loans. This may discourage some businesses from taking out loans, or it may reduce the amount they borrow.
· Decrease in loan demand: As the cost of borrowing increases, demand for loans may decrease. This may result in fewer businesses seeking SBA loans, which could lead to a reduction in the number of loans issued.
· Increase in loan default rates: Higher interest rates may make it more difficult for businesses to repay their loans. As a result, default rates may increase, which could lead to greater losses for lenders and the SBA.
· Changes in loan terms: Higher interest rates may prompt lenders to change the terms of SBA loans, such as by requiring higher collateral or increasing the size of down payments seeking the maximum protection under SBA rules. This could make it more difficult for some businesses to qualify for loans.
Overall, higher interest rates can make it more difficult and expensive for businesses to obtain SBA loans, which could have a negative impact on small business growth and economic activity.
Has There Been an Increase in The Rate of Defaults On SBALoans?
The Small Business Administration (SBA) regularly releases data on the performance of its loan programs.
According to the SBA's FY 2021 Annual Report, the overall default rate for SBA loans in FY 2021 was 2.24%, which is down from 2.45% in FY2020. However, it's important to note that this data only goes up until the end of the fiscal year, which is September 30, 2021.
It's possible that the default rate may have increased sincet hen due to ongoing economic conditions and the impact of the COVID-19 pandemic on small businesses. However, without more recent data, it's difficult to say for sure.
If you have defaulted on your SBA loan, contact Protect LawGroup today.
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 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.
Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency. After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.
.jpg)
