At Protect Law Group, we are proud to be the go-to law firm for small business owners facing loan challenges. If your business is struggling to make loan payments, you may be dreading the possibility of defaulting on your SBA loan. Your thoughts may be running wild with questions such as, “what happens if I can’t keep up with my SBA payments?” or “what are the consequences of defaulting?”
If you’re wondering what happens when you default on an SBA loan, you’re not alone. In today’s blog, we’re discussing four important things you need to know about defaulting on an SBA loan. Keep reading to learn more, then reach out to our SBA loan attorneys today.
Your Creditor has the Right to Accelerate Payments
When you default on an SBA loan, the creditor has the right to immediately demand payment on the entire balance of the loan. This means that even if there are more payments due on the loan, they can now be immediately due and payable. This can be a massive financial burden for any small business owner to bear.
You Are Liable for Collection Costs
As part of the loan documents, you likely agreed that you would be liable for the costs associated with the creditor collecting the loan in case of a default. This can include attorney’s fees and other collection costs.
Defaulted Loans Can Hurt Your Credit Score
Along with financial repercussions, defaulting on an SBA loan can also have a negative impact on your credit score. A defaulted loan appears on your credit report and affects your credit score, making it more difficult to get loans or credit in the future.
Defaulted Loans Can Lead to Legal Action
Just as defaulting on a loan could seriously damage your credit, it can also trigger legal action. If your creditor is unable to collect the loan balance, they may take legal action against you. In extreme cases, your assets may be seized, or your wages could be garnished.
Defaulting on an SBA loan can have serious consequences if not handled carefully. Thankfully, we offer the SBA loan help you need to get through the difficulty and find relief. Business debt relief is possible — and our SBA loan attorneys can help provide you with the assistance you need to navigate the nuances of a difficult system and get the loan forgiveness you need.
At Protect Law Group, our passionate SBA loan attorneys have the knowledge and experience to help guide you through the legal process and identify the best solution for your financial situation. From SBA loan investigation and discovery to deferment and modification, our mission is to ensure you have advice tailored to suit your needs. If you have any questions regarding defaulting on an SBA loan or what you can do in your specific situation, don’t hesitate to contact us now!
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.
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.
Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.
The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.
Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.
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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