SBA Loan Default: The Fine Print
Dealing with an SBA OIC case can be hard. You should allow one of our lawyers to settle SBA debt for you. Talk to us about your SBA loan default situation.
Average Small Business Loans
Owning a business is an exciting adventure.
You get to be the boss. You get to make major decisions. You create something you can be proud of for use to come.
For some people, their business is their life.
When starting a business, or giving it a boost, you need money. Most small businesses turn to loans to keep the business going.
Almost any business owner can apply and receive an average small business loan. There are many types of small business loans from many different types of lending institutions.
Are you planning to take out an SBA loan for your business? Before you do so, learn the different loan amounts and types you can choose from to make a smart decision for your business.
In simple terms, a small business loan is a set amount of money that a business owner or co-owners borrow from a lender. Both parties sign a pre-set agreement specifying the amount lent and the interest that you'll pay back over a period of time.
From there, you can find many different types of business loans and loan agreements.
A loan many business owners desire is an SBA loan. The U.S. Small Business Administration works with lending providers to help offer loans for businesses. They don’t directly lend the money but work with banks, credit unions, and other lenders to offer safe business loans.
The SBA protects most lenders by covering up to 85% of a loan in case the borrower defaults. Lenders don’t need to worry about losing large sums of money. Business owners have the opportunity to receive loans at lower interest rates.
Receiving an SBA loan depends on your eligibility, such as business type, credit score, and business equity.
In 2018, the average small business loan amount was $663,000. That’s for all business loans regardless of loan type.
Depending on the amount you need for your business and what your lender offers can range from $13,000 to over $1.2 million.
However, different types of business loans have different average amounts. Here’s a breakdown of the different types of business loans out there and their average lending amounts.
As mentioned above, SBA loans help protect both the loan lender and the business owner. These loans are great for those who need money for larger business endeavors as they come in a large lump sum.
You can find different loan programs that work with SBA loans, such as the micro-loan and the popular 7(a) loan program
The average business loan amount through small business loans backed by the SBA in 2017 was around $107,000.
Short-term business loans are similar to bank loans but an alternative, non-bank lender lends them out. This type of loan is easier to receive than long-term or medium-term loans.
If you have a small idea you want to try with your business, a short-term loan is the smartest option. As the name suggests, they’re generally smaller amounts that you can repay in a shorter amount of time.
The average amount for a short-term business loan is around $20,000.
Similar to short-term loans, this type of loan comes from alternative lenders. They’re larger sums of money you can use over an extended amount of time, generally between 2-5 years.
An advantage of this loan is it has a set repayment timeline with regular payments. A business owner can take up to $500,000 with a medium-term loan. Your credit, revenue, and other factors will determine your eligibility for this loan.
The average loan amount is around $110,000.
This type of small business loan offers more flexibility than regular business loans. You can borrow up to a certain amount of money, but only pay interest on what you borrow. This flexibility allows you to use and repay amounts when you can and only pay interest on what you use.
Non-bank lenders offer business lines of credit. They are more accessible than traditional loans and are a great solution for those who need flexibility with a short-term loan.
The average business line of credit amount is $22,000.
Financing is another way to get funding for your business.
With Equipment financing, you receive loans designed to help you pay for expensive business equipment. You can receive a loan that covers up to 100% of the equipment’s cost that you’ll pay back with interest over a set amount of time.
Invoice financing is similar but helps pay for any outstanding business invoices. You can receive a loan of up to 85% of the invoice cost.
Since these loan types depend on the value of the equipment or invoices, there isn’t a hard and fast average. You’ll need to talk with your lending provider to find what works best for you.
Another factor that affects the amount of an average business loan is the lending provider.
Business owners who need a large business loan can find those at a large national bank. You should note, most small business owners will probably not qualify for larger loans. Most large banks won’t lend small loans which makes it challenging for small businesses to get a loan.
You’ll need a strong credit score, reliable finances, and have an established business. The average amount is around $564,000.
Smaller banks typically lend out smaller loans compared to larger banks. They are still higher loan amounts that most small businesses don’t need. These loans average around $185,000.
Alternative lenders offer a greater variety of loan types that businesses of all sizes can enjoy. You can get much smaller loans compared to what traditional banks offer. These lenders also can lend larger amounts, upwards of $1 million.
The average loan with an alternative lender is around $80,000. A good choice for smaller businesses that don’t need a large loan.
Ultimately, the amount of an average small business loan depends on your business endeavors. It’s safe to say most small business loans will be around or below $100,000 based on your business ideas and needs.
If you default on your small business loan the lender and the SBA will look to you to pay the debt based on the personal guarantee you will need to sign.
If you have debt from a business loan, or just want to learn more, let us know
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.
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.
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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