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Learn who qualifies for an SBA loan deferment as well as when. Your frequently asked questions answered in one handy guide.
Book a Consultation CallIn 2021 alone, 61,000 SBA loans were issued to small businesses through Small Business Administration. This means that $44.8 billion in funding got directed at small businesses.
Small businesses have faced more than their share of challenges working through a global pandemic. While the economy has presented as strong, many businesses that already have loans continue to struggle.
If you're a small business owner who holds an SBA loan and you're facing a possible default, you need to explore your options.
What does it take to get an SBA loan deferment? Will you qualify to defer your loan payments? How long will a deferment allow you to put off making your payments?
Getting a loan deferment might be the difference between staying afloat and going under for some businesses. Read on to learn what you need to know about what it takes to qualify for an SBA loan deferment.
Let's first consider what you know about SBA loans. When you applied for an SBA loan, it was through a private lender who issued the money. The loan, in most cases, wasn't issued by the SBA.
Instead, the loan was issued by the lender you applied to, but it was backed for the lender by the SBA. The SBA helps define the terms of the loans depending on the type of loan you signed up for.
An SBA loan deferment would mean you can go back to your lender and ask them to defer payments on the loan temporarily.
The SBA allows most lenders the authority to defer a loan for a small period. Of course, many Covid relief loans came with built-in deferment options. Some even came with the option for loan forgiveness. More on these loans shortly.
It's essential to understand why a loan deferment might get issued.
The SBA wants to see your business functioning. But they also understand there can be external factors that might impact your business and its ability to make money.
A loan deferment would be granted because your business is facing a hurdle from an external source. This might include something like:
These external factors that your business can't control will still impact your business and its ability to make money. A loan deferment is typically granted because your business faces an external obstacle like these examples.
Your loan deferment options will depend on several factors. You don't want to wait until you default on your loan before seeking a deferment.
Plan ahead and try to anticipate when you might need help. Your options will depend on why you need a deferment and the type of SBA loan you currently hold.
Many COVID-EIDL loans came with provisions for deferment. More on this shortly.
Your lender grants an SBA loan deferment not the SBA. In fact, the lender can arrange a loan deferment without any involvement or approval from the SBA.
This is the point where it's critical to recognize you need help and seek it. If you anticipate an issue making your payments, you need to communicate with your lender.
While for many, it can feel easier to avoid the problem and pretend it doesn't exist. Your lender will be more willing to work with you if you openly communicate with them.
An SBA lender has the authority to provide a deferment for an average of up to six months with any communication with the SBA.
It's important, though, that you understand the terms of the deferment. Each lender can set the terms up how they wish. A lender might opt to:
It's important to both communicate and negotiate with your lender so you get the kind of deferment that will genuinely help your business in the short term. You don't want to agree to terms of a deferment that you already know you can't meet.
There were COVID-EIDL loans issued directly from the SBA in 2020, 2021, and 2022. These loans came with built-in deferment as part of the loan terms.
The loans were made available through the CARES Act, which has seen several updates. Now, if you were issued a Covid-EIDL loan during this time period, you have an automatic 30-month deferment from when the loan was issued.
You don't have to apply or do anything for this deferment. It is important to note that while you can defer paying on this type of loan for that period of time, the interest on the loan will continue to accrue. Interest is not deferred.
It's also important to understand what can happen if you default on an SBA loan.
There are a number of ways that the SBA can seek payment on past due debts. These include:
It's also important for a borrower to understand the SBA loan default statute of limitations. Basically, the SBA has six years to seek compensation for a defaulted loan before the statute of limitations expires.
If you're facing hardship in your business, it can feel scary and overwhelming. You might even be facing situations where you legitimately don't know your options or what you should do.
This is the time to seek legal help. An SBA attorney specializes in this type of problem and will know best what options you have. They can also work to negotiate on your behalf.
An SBA loan deferment can provide just the help your small business needs if you're facing tough times. You just need to know how to ask for and negotiate the deferment you need.
Let an SBA attorney who knows the ropes help you with your SBA loan. It's probably smart to get some legal advice before agreeing to any more terms with your SBA loan. Contact us today to connect with an attorney who can help you.
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 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.
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 executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
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