Small business owners face unprecedented times in this covid-19 economy. Many businesses have 2 major expenses to service every month: (1) SBA loan and (2) Commercial lease.
A material default occurs when the small business is not able to pay the agreed-upon monthly principal and interest payment. After several missed payments (typically 60-90 days), the SBA participating lender (if it is 7(a) loan) or Certified Development Corporation (if it is a 504 loan), will come knocking and contact you asking “where’s the monthly payment?”
Many small business owners will respond to their lender and request some time or try to modify their payment schedules. But some will just bury their head in the sand and avoid responding to their bank. It is better to respond to your bank as opposed to ignoring the problem. What you don’t want is for your SBA loan to be placed in “liquidation” status and transferred to the bank’s Special Assets Department (SAD).
SBA Loan Deferment
In the covid-19 economy, most SBA 7(a) lenders offer loss mitigation relief measures. Some lenders offer internal deferment. Deferment typically involves deferring or postponing the monthly principal payment due and allowing small businesses to pay interest only. The postponed monthly principal payments are then tacked onto the end of the original amortized payment schedule. Other lenders place the loan in the SBA CARES Act’s Small Business Debt Relief Program. Here, the SBA makes the principal and interest payments to the SBA lender on behalf of the business for six (6) consecutive months.
The Short Leash
If you are placed into a Deferment or the Small Business Debt Relief Program, this is your opportunity to pivot your business and come up with creative ideas to generate revenue while your payments on the SBA loan are temporarily postponed. Rest assured, however, that your bank will keep you on a short leash and may require monthly updates.
Some banks may not offer Deferment or placement into the Small Business Debt Relief Program. If your bank is not offering these loss mitigation measures, you need to find out why. It could be because you don’t qualify for these programs or that the bank simply wants to cut its losses and liquidate collateral that has been voluntarily pledged as security for the SBA loan. This collateral could be commercial real estate, residential real estate, bank or investment accounts, certificate of deposits or business, property and equipment.
If confronted with a situation where the bank will not assist you, you should consult with an experienced SBA attorney to discuss your options and come up with a game plan to counter the bank’s actions. Some options may include negotiating with the SBA lender directly, seeking assistance from the SBA and requesting that it mediate the impasse between you and the SBA lender or exploring arbitration or litigation based on lender liability theories and allegations.
Don’t Try to Resolve SBA Loan Issues without Professional Help
Don’t try to resolve SBA loan default issues by yourself. Speak to an SBA Attorney with Protect Law Group.
Protect Law Group has proven, nationwide experience resolving SBA loan problems.
Owe more than $30,000? Contact Protect Law Group for an SBA loan case evaluation or call us toll-free at 1-888-756-9969.
We can analyze your SBA loan problems and advise you on potential solutions.
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Why Hire Us to Help You with Your Treasury or SBA Debt Problems?
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 $150,000. COVID-19 caused the business to fail, and the loan went into default with a balance of $133,000. Client initially hired a non-attorney consultant to negotiate an OIC. The SBA summarily rejected the ineligible OIC and the debt was referred to Treasury’sBureau of Fiscal Service for enforced collection in the debt amount of $195,000. We were hired to intervene and initiated discovery for SBA and Fiscal Service records. We were able to recall the case from Fiscal Service back to the SBA. We then negotiated a structured workout with favorable terms that saves the client approximately $198,000 over the agreed-upon workout term by waiving contractual and statutory administrative fees, collection costs, penalties, and interest.
$750,000 SBA 504 LOAN - NEGOTIATED TERM REPAYMENT AGREEMENT
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.
$488,000 SBA 7A LOAN - SBA OHA LITIGATION
Clients personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.