A You Need to Know About SBA Loans
What is the worst that can happen in case of an SBA loan default?
Nobody should even think of defaulting on SBA loan because of the severe consequences they would face. Your house could end up being put up for foreclosure if it has equity. Your small company or business can be shut down and everything inside the premises sold to the highest bidder. 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. Whenever a person defaults on the SBA loan, the lender will continue handling your issue until they run out of options with regards to the loan 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. The borrower and guarantors will get a letter written by SBA with regards to the loan. Upon receiving such a letter, you are free to deal with SBA directly when 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 lender has not gotten back to me with regards to my SBA settlement offer. Am I off the hook?
No. Banks today have hectic schedules and have become a place that is full of clients and activities. 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 accurate?
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.