Critical Questions You Should Inquire About SBA Loans
What’s the worst thing that can happen in case of an SBA loan default?
It is not advisable to default on SBA loans because of the severe consequences involved. They can foreclosure your home if it has equity in it. Your business can be closed down and all of your office items sold. They can find a personal judgment against you and serve you with a subpoena of which you will need to explain and respond on time before they send the police to arrest you. In short, SBA loan default is bad, and you should be proactive in settling.
Does my settlement offer go through my lender or directly to the SBA?
It relies on if your lender has referred the matter to the SBA. In cases of SBA loan default, the creditor continues handling the matter until they feel that there is no prospect of additional recovery.
When the lender has run out of options as mentioned above, the file is “wrapped up” and referred to the SBA to follow up on the loan recovery. Usually, a letter is written by SBA to the Guarantors and borrower concerning the loan. Once you receive this letter, then you have the go-ahead to deal directly with SBA when it comes to settling your loan. On the flip side, if you have defaulted on your loan recently, there’s still collateral that hasn’t yet been liquidated, and you will most likely have to continue dealing with your lender.
My Creditor has not gotten back to me with regards to my SBA settlement offer. Am I off the hook?
Probably not. Currently, the “workout” areas at many banks have been busting at the seams. There are too many files and fewer hours to work on them during the day. Just because they don’t contact you back or reply to your emails does not necessarily mean that you are off the hook or that they have had SBA loan forgiveness.
My bank told me that because my loan is guaranteed by the SBA, they cannot settle. Is that true?
This is not accurate, but, it has been a growing concern that people ask nowadays and needs to be answered. The SBA has created a process, specific form like SBA form 770 and SBA form 1150 with the aim of settling the debt for less than the full balance. If your bank is always blaming the SBA when it comes to settling these loans, the chances are high that they have never lent the SBA and don’t know what the SBA offer in compromise entails or they just don’t want to pay up.
Partner post: basics