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What Is A Forbearance Agreement? Protect Law Group

As of October, the SBA has stopped paying for your SBA business loan. Nevertheless, due to the Covid crisis your business remains mired with lower revenue. In fact, you have now defaulted on your SBA loan with the lender. How do you proceed with your business?

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What Is A Forbearance Agreement? Protect Law Group

A forbearance agreement with your SBA lender can provide you with the time you need to get your business back on track.  Read on to learn more about forbearance agreements.

How Does a Forbearance Agreement Work?

As of October, the SBA has stopped paying for your SBA business loan.  Nevertheless, due to the Covid crisis your business remains mired with lower revenue.  In fact, you have now defaulted on your SBA loan with the lender.  How do you proceed with your business?

What is a forbearance agreement?

Frequently, a forbearance agreement with the SBA lender can strike a temporary arrangement under which the existing default continues to exist, however, the lender forbears from taking any legal action.  As such, the lender will not file suit or foreclose on business collateral.  The forbearance period allows you to continue operations and possibly negotiate a workout of the loan or allow you to arrange for a buy out of the loan.

How Long Does a Forbearance Period Last?

The length of a forbearance period will vary.  Largely, the amount of time depends the parties needs.   Moreover, an agreement does not have to be an all or nothing affair.  For example, an SBA lender may wish to pursue certain collateral while postponing pursuit of other items.  In any event, forbearance agreements exist as temporary agreements.

What are Common Terms of a Forbearance Agreement?

Typically, the SBA lender will require a good deal of acknowledgements and representations confirming the loan.  For instance, relevant topics include the loan balance, the validity of liens, and the non-existence of waivers.  Moreover, the agreement will describe the conditions and the time period for which an SBA lender agrees to forbear on its rights.

What Will an Agreement Cost?

Usually, a forbearance agreement includes a good-faith down payment at the time of execution.  Additionally, other conditions may include:

  • An agreement to make scheduled additional payments
  • Modification of scheduled payments for a period of time
  • Pledging of additional collateral
  • Execution of additional guaranties
  • Reaffirmation of existing personal guaranties

Don't Try to Negotiate a Forbearance Agreement Alone

In conclusion, a forbearance agreement can provide benefits to both a lender and you in time of financial stress.  This period provides you with an opportunity to show the SBA lender your business remains viable and deserves the investment of the lender.  Further, the agreement relieves the parties of the anxiety and urgency which surround the initial stages of any problem loan.

However, you should have experienced counsel on your side.  Contact Protect Law Group today for a free initial consultation.

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

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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

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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

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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.

$337,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

$337,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

Clients personally guaranteed SBA 504 loan balance of $337,000.  The Third Party Lender had obtained a Judgment against the clients.  We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.

$1,200,000 SBA 7A LOAN - SBA OHA LITIGATION

$1,200,000 SBA 7A LOAN - SBA OHA LITIGATION

Client personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture.  After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against our client’s monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars.  We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA).  As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy), but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.

$58,000 SBA 7A LOAN - AWG HEARING DEFENSE

$58,000 SBA 7A LOAN - AWG HEARING DEFENSE

Client personally guaranteed SBA 7(a) loan balance of $58,000.  Client received Notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings.  We represented client at the Hearing and successfully defeated the AWG Order based on several legal and equitable grounds.

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