SBA Loan Defaults: Traditional Vices Ring Up Defaults
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If you're interested in getting a business loan for your small business, there are some important do's and don'ts you'll need to keep in mind.
Book a Consultation CallSmall business loan approval rates are on the rise, and more small business owners are getting the full amount of the loan they're requesting.
If you're interested in getting a business loan for your small business, there are some important do's and don'ts you'll need to keep in mind.
These guidelines will help you make the right decisions and increase your chances of getting all the money you need to get your business off the ground.
Getting a business loan
Before diving into the specific dos and don'ts of getting a business loan, it's important to understand some of the different types of small business loans and their repayment terms
This involves receiving a lump sum of money that you will repay over a predetermined period of time with interest.
These SBA loans are guaranteed by the Small Business Administration. They typically have lower interest rates and longer repayment terms.
This gives you access to money up to a specific limit. You only pay interest on the money you've withdrawn.
As the name suggests, this type of loan is meant specifically to help you purchase the equipment you need for your business. The equipment serves as collateral for the loan.
Business credit cards are revolving lines of credit. You can draw from and repay them as often as needed. They're typically best when used for financing ongoing expenses like travel or utilities.
When it comes to seeking out a business loan for your small business, you must be sure to keep these guidelines in mind:
Small business owners who are aware of their business credit scores are 41 percent more likely to get approved when they apply for a business loan.
Your personal credit score makes a difference, too. It tells potential lenders a lot about your financial habits.
One of the easiest ways to keep your finances in check is to use a separate bank account for your business. Keeping them separate actually decreases your chances of being turned down for a loan, too.
There are lots of lenders out there. You can even find lots of online lenders with rates and repayment options that are in line with or better than the options offered by traditional banks and credit unions. Take your time and look at all the different choices before making a decision.
There are a lot of documents you'll need to have on hand when you're applying for a business loan. Some specific documents you ought to keep easily accessible include:
Carefully review what each loan requires and have that information ready to go so that you're prepared.
Many small business owners who are denied financing don't know why their applications get denied. These small business owners often tend to get turned down more than once, often because they don't learn from the mistakes they made the first time around.
There are more costs associated with a business loan than just the amount you're seeking to borrow. From interest rates to the APR, there are other costs you need to keep in mind. Use a loan calculator so that you understand the true cost of your loan before deciding whether or not it's right for you.
Finally, remember that you don't have to go through the loan application all by yourself. There's nothing wrong with taking advantage of all the resources out there and working with an expert.Â
Get in touch with someone at your local SBA office. They can put you in touch with a mentor who will give you the advice you need to increase your chances of getting approved.
At the same time, there are also some things you ought to avoid if you want to increase your chances of your loan request getting approved:
Many business owners make the mistake of only looking for loans from their local bank or credit union. Remember, there are lots of alternative lenders out there. Don't be afraid to seek them out.
No matter how optimistic you are, chances are your income is not going to be as high in your first year as you predict.
Go over your budget, then decrease your income by 25-50 percent. You'll be more likely to get approved for your loan if you're realistic.
At the same time, don't underestimate the expenses you'll be met with as you're getting your business off the ground. Go back over your budget and increase your expenses, just to be safe.Â
When you apply for a business loan, lenders will ask you how much money you want and what you're going to use it for.
Be specific about the amount you want and your intentions for that money. Don't beat around the bush -- lenders want to see that you've got a specific plan.
Finally, while there's nothing wrong with seeking out a loan from an alternative lender, it's still important to ensure that your potential lender is a reputable one. Remember, if their offer seems too good to be true, it probably is.
If you have defaulted on an SBA loan, our experienced SBA attorneys offer assertive legal representation.
We can help at Protect Law Group. Contact us today to schedule a consultation.
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.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the 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.
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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