Settlement Strategies for Small Business Loan Default
If you are struggling to make payments on your SBA guaranteed loan, if your note has been called, or if you are in default, we can help. Our strategies are proven time and again to help business owners in default on their SBA loans reach a settlement.A debt workout is a clear path to relief for unsupportable SBA loan debt and defaults. No two strategies are exactly the same, but the core steps taken in our process are constant:
- You contact us for a free consultation. During your no-obligation consultation, our goal is to understand your needs as a business owner and provide a roadmap for your SBA loan workout.
- We immediately protect you and your business. Directly after partnering with you, we will implement an action plan that protects and preserves your business through the workout.
- We negotiate a realistic settlement. Our experts work with your lending bank and the SBA to reach a settlement that satisfies all parties and strips your business and you personally of the debt, on terms that are realistic for your business to meet.
- Your business prepares for settlement. During this time, we work with your business to prepare for the agreed-upon settlement, whether that is saving for settlement, reorganizing, providing an exit strategy or in certain cases selling the business.
- You settle your SBA Loan. You pay the lender as described in the settlement terms and regain control of your life.
We have successfully implemented this strategy hundreds of times over the years. After removing the debt from the business and then working out your personal guaranty to an affordable payoff, the business should be able to operate profitably and successfully.The most critical factor in negotiating an SBA loan settlement is time. If your payments are unsupportable and default is looming, it is time to seek professional help.
Defaulting on SBA Loans
There is a lot of misinformation regarding SBA loan settlement. Banks want to intimidate you into paying more than your business can afford, and your lawyers and accountants typically have little experience in this area and provide no alternatives other than bankruptcy to help you.
Since an SBA loan is a federally guaranteed debt, people often assume that you cannot file bankruptcy to discharge the debt and, worse yet, that it cannot get settled outside bankruptcy. This is wrong.
An SBA loan is just like any other business loan that you would obtain from a commercial lender. The participating bank issues the loan, but the banks’ losses are guaranteed up to a certain percentage by the government, should you default on the loan. The debt is held by the participating lender and can be negotiated directly with them once you default on the SBA loan.
If you default, the bank and the SBA will aggressively pursue all your business and personal assets and liquidate everything it can to reduce the debt.
If you do not quickly take action on your defaulted SBA loan, things can get ugly for you.
If the participating bank “charges off” your loan to the SBA, negotiations can get even tougher. The Small Business Administration is a part of the US government. When you default on your loan and fail to reach a resolution with your bank, the bank will turn your case over to the Department of Treasury.
The Department of Treasury handles the collection of all Federal Debts including student loans, tax debt, and, yes, defaulted SBA loans. At the Department of Treasury, the debt will be significantly harder to workout, so you want to avoid getting this far without a resolution with your lender.
If it has already been sent to the Treasury, we can still implement a satisfactory workout, it simply takes longer, is harder to accomplish and is frequently less successful than if worked out with the SBA.
Why Our Strategies Work
A debt workout is proven to be successful in resolving SBA loan defaults because it is a friendly approach to the bank and to the Small Business Administration. We include both parties in our workout team to make certain that we satisfy the SBA requirements and that the bank gets its guaranty payoff as soon as possible.
In doing this, our clients are able to fulfill their obligations while significantly reducing or eliminating the debt they carry. Our clients win as well as the bank. This approach and strategy have served our clients, and us, extremely well for over 35 years. Everyone wins.
Contact our team today to learn how our strategy can work for you.