Legal Considerations for Small Business Owners
Empower your small business with expert legal guidance from the SBA attorneys at Protect Law Group. Learn more about legal considerations today!
Most people start their own business with the highest of hopes. Many times, to fund a new business, a person will receive a loan through the SBA (Small Business Administration). While these loans are administered through the SBA, they are often facilitated by individual lenders. However, if a small business taking out one of these loans was to encounter financial disaster, which causes the business close, there would likely be an issue with SBA loan default
In many of these instances, lenders will try to close the books on a particular loan by something known as an SBA Offer in Compromise. This is an agreement between the lender and the borrower to repay a portion of the loan when full repayment isn't possible. The problem that many small businesses face is dealing with the SBA OIC claim form, as well as dealing with a less than a reputable lender. This is where attorneys may be helpful to the individual or business that initially took out the SBA loan.
Often, when the loan is in default, the business or the business owner will receive an SBA demand letter. This is where the offer in compromise process should begin. An attorney can help negotiate with the lender to achieve the best terms for the offer in compromise. What this does is cleans the slate and allows the owner to walk away from the loan having it settled and not having it existing on the owner's credit report.
However, SBA loan foreclosure can also provide an opportunity for an attorney to mitigate the default in a different manner. The fact is that there has been significant issues with predatory lending in the small business administration loan process. There are many lenders that have used improper tactics and submitted loans with less than equitable fees and interest rates. If a small business feels as if this is the case with their lender, an attorney can investigate this issue and can bring these issues before the Small Business Administration.
Whether it's a Tax Offset Program, a delicate negotiation for an offer in compromise or if it's uncovering predatory lending practices, having an SBA loan attorney is essential. While it's never fun to attend to things after a business idea has failed, this is one way to ensure that there are less financial repercussions after everything is said and done.
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 balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.
Client’s small business obtained an SBA 7(a) loan for $150,000. He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made. The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.
Clients borrowed and personally guaranteed an SBA 7(a) loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
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