A You Need to Know About SBA Loans
What’s the worst thing that can happen in case of an SBA loan default?
There are some very dire consequences if you default on SBA loans. Your house could end up being put up for foreclosure if it has equity. They can even go as further as shutting down your business and sell all of your equipment. You could also be served with a subpoena to give information and can be arrested by the police in some states in you don’t respond to it. In short, SBA loan default is bad, and you should be proactive in settling.
Does my settlement offer go through my creditor or straight to the SBA?
This concern will depend on whether or not your file has been forwarded 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.
Once the creditor reaches that point, he has no option but to refer the matter to the SBA for further collection efforts. The borrower and guarantors will get a letter written by SBA with regards to the loan. This letter is a clear indication that the lender is no longer involved in the negotiations and you are free to deal with SBA directly. Let’s say you have defaulted your loan payment over a couple of months, and your collateral might not have been liquidated, you will, therefore, still need to deal with your lender for a while.
My lender 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. You should however not think for a second that because they are not responding to your emails or calling you back that you’ve slipped through the cracks or that they have granted you SBA loan forgiveness.
My bank told me that because my loan is guaranteed by the SBA, they cannot settle. Is that accurate?
This is not accurate, but, it has been a growing concern that people ask nowadays and needs to be answered. The SBA has come up with a procedure that involves specific forms that include SBA form 770 and SBA form 1150 to allow people settle their loan for less than what they borrowed. If your lender is blaming the SBA all the time, It is because your creditor does not lend the SBA and is not familiar with the SBA offer in compromise or your creditor does not want to settle and is trying to blame the SBA.