How the Federal Government Shutdown Affects SBA Loan Borrowers and Guarantors
How the Federal Government Shutdown Affects SBA Loan Borrowers and Guarantors
Small business owners acquire commercial loans to start their companies. These opportunities allow them to gain financing to purchase a location and merchandise needed to operate the business. When the owner can no longer manage this financial obligation, they need an SBA Offer in Compromise to avoid the negative impact of a default.
Essentially, an SBA offer in compromise is a settlement offer. The small business owner submits an application with their lender to acquire approval. The lender evaluates the financial circumstances of the business owner and identifies a value that is fair and reasonable. This value is based on a percentage of the total value owed to the lender. Upon acceptance of this value, the business owner submits the payment as specified.
An SBA loan default is the primary reason for seeking an offer in compromise. Once the loan is in default, the lender has the legal right to file a claim against the identified collateral. The collateral could include the building, machinery, and any inventory that was financed through the loan. If the borrower doesn't take action, the lender could seize the collateral and generate a major financial loss for the borrower. An SBA loan foreclosure is included in the available legal actions.
The borrower must hire an attorney to communicate with their lender. When hiring an attorney, the borrower must provide the SBA demand letter. The attorney discusses a possible settlement offer with the lender. In most cases, the lender will accept a lower value in order to settle the debt. Once it enters default, the lender may acquire a portion of the funds through an insurance settlement. When this is the case, it gives the borrower leverage over their case.
Small business owners need commercial loans to open their companies. These financing opportunities are available to any party that has a lucrative business venture. However, the mismanagement of their finances could lead to a default. When this happens, foreclosure is an almost certainty. Small business owners who need a settlement offer or to participate in a Tax Offset Program should contact an attorney 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 sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
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 received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
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