The Small Business Administration provides loans for entrepreneurs to start smaller business ventures. These loans are guaranteed by the government and require the business owner to pay them back according to the schedule set up. When the business owner faces financial difficulties, they may not have the funds needed to repay the loan. This could result in a default. When this happens, an SBA Loan Offer in Compromise could prevent the company from facing financial ruin.
What is an SBA Loan Offer in Compromise (Form 1150)?
Essentially, the offer in compromise is a settlement offer submitted by a financial advisor or attorney. It reflects are reduced value in which the business owner could pay their lender to settle the debt. An SBA loan default requires action on the borrower’s part to avoid unwanted circumstances. This compromise is an effective strategy to prevent these circumstances and prevent a larger financial loss for the owner.
When Should Business Owners Utilize an Offer in Compromise When Dealing with the Small Business Administration?
The owner should utilize an offer in compromise as soon as they receive the SBA demand letter. This letter is the last step of the notification process before the SBA takes further legal action. These actions could include seizure of property and assets. They could place a lien against the borrower’s checking account, savings account, and all property in their name. These measures are taken to acquire payment of the total balance plus any late fees that accumulated.
Can the SBA Foreclose on the Owner’s Home if You Fail to Submit an SBA Loan Offer in Compromise?
Through an SBA loan foreclosure, the lender could seize the borrower’s primary residence. This could occur if the property is used as collateral or included in the properties owned by the business. If properties and assets that are business-related could be used to pay off the loan, the primary residence isn’t in jeopardy. However, the consumer may need an attorney to fight against these actions.
Small business owners must take quick action if their loan defaults. These actions could lead to a domino effect in which they lose all their property and assets. An attorney could help them by finding a better solution to this problem. Business owners who need assistance with a compromise or Tax Offset Program should contact an attorney immediately.