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Book a Consultation CallAn SBA Loan Deferment is a temporary remedial option. If your small business is having short term financial difficulty because of a seasonal slump and can prove through pro forma financial statements to the SBA lender of record or the Certified Development Corporation (CDC) that a turnaround is just around the corner and you need a temporary reprieve from paying on the SBA loan, you should consider applying for a deferment. Generally, if you qualify, the SBA lender or CDC, with the SBA’s approval can provide you with either a three (3), six (6), nine (9) or twelve (12) month reprieve from paying either the principal amount (and allow interest-only payments) or no principal and interest. However, if you consider this option, be advised that you may be asked to reaffirm the loan with personal guarantees or even pledge additional collateral. Needless to say, this is not an option that you should consider without either representation or consultation with a qualified SBA Attorney.
An SBA Loan Modification is a remedial option when the small business is still a viable concern, is still generating revenue but due to current circumstances, the old loan terms no longer make financial sense for all parties involved. A loan modification package is generally presented when it involves an SBA 504 Loan and the pledged collateral or building’s fair market value has decreased significantly such that the loan should be modified (i.e. principal and interest payment terms, modification of principal loan balance to reflect current fair market value appraisal of real estate collateral, payment schedule etc.). In this situation, special factors need to be evaluated, formal appraisals will need to be conducted, and a proposal should be made in order to apply for a loan modification which can benefit both parties. Again, the borrower will be required to provide updated business and personal financial information, additional pledged collateral may be requested, and formal appraisals will be done as part of the modification process. This is not a situation where the borrower or guarantor should engage in this process without qualified representation or consultation. However, if the small business feels that it doesn’t need assistance, we recommend that you review applicable SBA SOPs and the Code of Federal Regulations (CFRs) prior to presenting your loan modification application.
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An SBA Loan Modification is a remedial option when the small business is still a viable concern, is still generating revenue but due to current circumstances, the old loan terms no longer make financial sense for all parties involved. A loan modification package is generally presented when it involves an SBA 504 Loan and the pledged collateral or building’s fair market value has decreased significantly such that the loan should be modified (i.e. principal and interest payment terms, modification of principal loan balance to reflect current fair market value appraisal of real estate collateral, payment schedule etc.). In this situation, special factors need to be evaluated, formal appraisals will need to be conducted, and a proposal should be made in order to apply for a loan modification which can benefit both parties. Again, the borrower will be required to provide updated business and personal financial information, additional pledged collateral may be requested, and formal appraisals will be done as part of the modification process. This is not a situation where the borrower or guarantor should engage in this process without qualified representation or consultation. However, if the small business feels that it doesn’t need assistance, we recommend that you review applicable SBA SOPs and the Code of Federal Regulations (CFRs) prior to presenting your loan modification application.
Contact us today for a Case Evaluation.
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.
Our firm successfully facilitated the SBA settlement of a COVID-19 Economic Injury Disaster Loan (EIDL) f borrower received an SBA disaster loan of $150,000, but due to the severe economic impact of the COVID-19 pandemic, the business was unable to recover.
Despite the borrower’s efforts to maintain operations, shutdowns and restrictions significantly reduced the customer base and revenue, making continued operations unsustainable. After a thorough business closure review, we negotiated with the SBA, securing a resolution where the borrower paid only $6,015 to release the collateral, with no further financial liability for the owner/officer.
This case demonstrates how businesses affected by the pandemic can navigate SBA loan settlements effectively. If your business is struggling with an SBA EIDL loan, we specialize in SBA Offer in Compromise (SBA OIC) solutions to help close outstanding debts while minimizing financial burden.
Clients personally guaranteed SBA 7(a) loan balance of over $300,000. Clients also pledged their homes as additional collateral. SBA OIC accepted $87,000 with the full lien release against the home.
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