As many as 80 percent of new small businesses fail within 18 months of opening their doors. By year 10, the number climbs to 96 percent. These are not poorly operated companies being run by unprepared entrepreneurs. Many of them fall victim to a weak local economy, uncontrollable circumstances and too much competition in their area. All of these business will have debt they default on, and many will have SBA loans they are unable to pay back as expected.
An SBA loan default can result in the loss of business property, business accounts being seized and personal property may be seized as well. The result can be financially devastating for the business owner who is already struggling. It can lead to wage garnishments for the borrower and prevent them from receiving any future loans from the SBA. If the amount collected is insufficient, the U.S. Treasury can take the reins and collect through the Tax Offset Program. This can result in additional fees and interest charges being added to the debt and any tax refunds will be seized or garnished until the amount is repaid in full.
To reduce the impact to the borrower, an SBA Offer in Compromise is an option that may make it easier for the borrower to satisfy their end of the agreement without losing all of their property. This method is not allowed if the borrower already has the means to repay the loan. Borrowers who are able to pay a lump sum or a repayment plan that will not exceed 5 years are more likely to get their offer approved.
It will benefit the borrower to contact the SBA or an attorney before they reach the point of forcing an SBA loan foreclosure. The collection methods with the SBA are similar to other debts. Missed payments will traditionally result in collections calls and letters. If an SBA demand letter is received, it is important to respond to it, but to do so correctly. Contacting an attorney familiar with this type of legal matter will make it much easier to avoid making common mistakes that could have serious financial consequences. SBA collection processes can be aggressive, so do not ignore the warnings. Take action immediately to reduce the potential impact.
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.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $140,000 on behalf of a husband-and-wife guarantor pair. The business had closed following a prolonged decline in revenue, leaving the borrowers personally liable for the remaining balance.
After conducting a comprehensive financial analysis and preparing a detailed SBA Offer in Compromise (SBA OIC) package, we negotiated directly with the SBA and the lender to achieve a settlement for $70,000 — just 50% of the outstanding balance. This settlement released the borrowers from further personal liability and allowed them to move forward without the threat of enforced collection.
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.
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.
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