Challenges in SBA Loan Forgiveness
SBA Loan Forgiveness can be a challenging process. Don’t go through it alone, as Protect Law Group is here to help! Learn more today.
Defaulting on a SBA loan with the Trump Administration's reduction in SBA staff will impact your chances for resolution. Learn about the impact and how to protect yourself.
Book a Consultation Call
On March 21, 2025 the U.S. Small Business Administration (SBA) unveiled a sweeping agency-wide reorganization that will eliminate roughly 2,700 positions—about 43% of its workforce—returning headcount to pre-pandemic levels. SBA Administrator Kelly Loeffler framed the cuts as a move to “do more with less” and refocus on the SBA’s core lending and disaster-relief missions (Small Business Administration).
Less than two months later, a federal judge in San Francisco issued a preliminary injunction pausing the broader Trump executive-branch down sizing plan, citing potential statutory overreach and noting that the SBA is on the list of agencies targeted for up-to-40 % layoffs (NPR).
For borrowers and guarantors already wrestling with COVID-EIDL, 7(a) or 504 obligations, this one-two punch of reorganization and litigation raises urgent questions: Will my loan servicing slow down? Will appeal rights change? What happens if my case is already at Treasury?
Change: 43% staff reduction
What SBA Says: Saves $435M/yr; trims “mission creep” (Small Business Administration)
What It Could Mean for You: Fewer case officers in servicing & OIC/Workout units; longer response times
Change: Centralized fraud & risk review
What SBA Says: Moves oversight to CFO’s office (Small Business Administration)
What It Could Mean for You: Higher scrutiny on eligibility, investigations/audits, enforcement & OIC/Workout proposals
Change: Disaster-loan servicing moved to new Office of Disaster Recovery & Resilience
What SBA Says: Cross-trains field staff (Small Business Administration)
What It Could Mean for You: Possible reassignment of your case file and new points of contact
Change: Sunset of pandemic-era staff & programs
What SBA Says: Eliminates Community Navigator, DEI pilots, Green Lender Initiative (Small Business Administration)
What It Could Mean for You: Reduced outreach and counseling resources for distressed businesses
Scenario: COVID-EIDL borrower in default
Likely Effect: Potential backlog as staff positions are abolished or reassigned
Proactive Step: Submit settlement or hardship requests now before staffing changes take hold
Scenario: 7(a) or 504 under review in response to Official 60-Day Due Process Notice before referral to Treasury's Bureau of Fiscal Service
Likely Effect: File reviews may slow; centralized risk unit may reopen closed matters
Proactive Step: Keep meticulous records & be prepared to respond to new document requests
Scenario: Repayment (i.e., Offer-in-Compromise (OIC) or Workout) pending
Likely Effect: Decision windows could lengthen unreasonably or summary denials and rejections may soon follow without a reasonable basis
Proactive Step: Request status updates in writing every 30 days; document prejudicial effect from delay; consider request for reconsideration if SBA issues summary denial or rejection
Scenario: FOIA/PA discovery and records inspection requests
Likely Effect: FOIA/PA queue historically understaffed; cuts may compound delay
Proactive Step: Request status updates every 30 days; if no progress, file OHA administrative appeal or engage in OGIS mediation to expedite or compel compliance
Scenario: OHA Appeals contesting referral to Treasury’s Bureau of Fiscal Service
Likely Effect: If SBA recall authority or staff is reduced, expect many more files to be referred to or remain at Treasury
Proactive Step: Consider SBA Office of Hearings & Appeals (OHA) litigation for recall based on due process or APA violations and leverage negotiations or proceed with adjudication to a final Decision by the United States Administrative Law Judge (ALJ)
At Protect Law Group, our Firm Attorneys are well-versed in SBA debt resolution, OHA litigation and Treasury AWG Hearing cases. We are already:
If you have a COVID-EIDL, 7(a), 504, Physical Disaster or PPP loan problem—or need to address a Treasury offset—contact us today for a Case Evaluation.
Source: https://www.nytimes.com/2025/05/23/business/economy/trump-small-business-administration.html
This article is provided for informational purposes only and does not constitute legal advice. Consult a qualified SBA-Attorney for advice regarding your individual situation.
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 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.
Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
Clients obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
.jpg)
