What Happens If a PPP Loan is Not Forgiven?
If your application for PPP loan forgiveness is denied by the SBA you have appeal rights. Learn more about how to assert your rights to an appeal.
The SBA Office of Inspector General (OIG) recently issued an Alert regarding SBA EIDL Loans and the potential warning signs involving COVID-19 fraud and abuse. This video article is an exact reproduction of the SBA OIG’s Notice of Alert that was published on 7/14/2020.
The Small Business Administration’s (SBA’s) Economic Injury Disaster Loan program is part of the nation’s response to the Coronavirus 2019 (COVID-19) pandemic under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). These economic injury loans are intended to help eligible small businesses with expenses such as:
Interest rates vary between 2.75 percent and 3.75 percent. Terms are based on the borrower’s ability to repay but may be up to a maximum of 30 years. Eligibility determination is the same as for SBA’s Payroll Protection Program loans.
Note: Beginning July 11, 2020, SBA no longer offers advances on Economic Injury Disaster Loans. Until July 10, 2020, eligible small business owners in all U.S. states, Washington, D.C., and territories were able to request an advance of up to $10,000.
The current maximum loan amount is $150,000 per entity or a maximum amount of $2 million for all affiliated businesses. Loan disbursements and advances are made through the U.S. Department of the Treasury’s automated clearing house system as deposits from SBA.
Lenders who have questions about eligibility or need to return money should contact SBA at eidl.ach.inquiries@sba.gov
What to Do if You Suspect Fraud
Lenders who suspect attempted fraud should contact the National Center for Disaster Fraud Hotline at 1-866-720-5721 or fill out the Web Complaint Form at https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
Lenders may also report fraud, waste, abuse, or mismanagement of federal funds involving SBA programs, operations, or personnel to the SBA OIG Hotline at (800) 767-0385. You can also submit a complaint form at https://www.sba.gov/about-sba/oversight-advocacy/office-inspector-general/office-inspector-general-hotline#section-header-0
Seeking and obtaining advice of counsel is an important step that small businesses should utilize prior to executing the final SBA EIDL loan documents and accepting receipt of federal funds in order to defend against an SBA OIG investigation or audit for potential fraud and abuse.
Protect Law Group has proven, nationwide experience handling regulatory and compliance issues involving the SBA loan program.
Owe more than $30,000? Contact Protect Law Group for a Case Evaluation or call us toll-free at 1-888-756-9969.
We can analyze your SBA debt or Treasury problems and advise you on potential solutions.
This presentation contains images that were used under a Creative Commons License. Click here to see the full list of images and attributions:
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.
Clients obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
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.
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