A You Need to Know About SBA Loans
What is the worst 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. Your house or property can be put up for foreclosure as long as it has equity in it. 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. Therefore, defaulting on SBA loan is not good for you considering the consequences mentioned above.
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.
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 other hand, if you are late on paying your loan, you might find that there is still collateral that has not yet been liquidated, and you will still have to deal with your creditor.
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 documents, and not enough hours during the day to give attention to each file coming to their desks. 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 true?
No, however, it is a question many people have asked before and is worth addressing. 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 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.