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).
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.
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 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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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.
The clients are 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.
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.
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 his 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.
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