SBA guaranteed loan workout myths….do not believe everything you hear
Like so many matters, unless you concentrate in a specific area and thus have deep and broad hands on experience in how to handle the many variations of that theme, you cannot possibly provide the expertise required to do the best job possible.
In other words as I have said in other entry’s, do not do your own SBA workout or your own brain surgery…get an experienced specialist.
The knee jerk reaction to having a troubled loan is to get a lawyer.
Rethink this.
There may be ancillary legal issues involved requiring a lawyer especially if you allow the loan to default and are involved in the foreclosure process, and even then I suggest the answer is in a business workout not a legal defense. As to what possible defense could you mount? Usually none.
Overall an SBA workout is a business problem not necessarily a legal issue and requires an expert who has handled many SBA loan workouts and thus has a handle on what works and what does not work…first hand.
The objective is to reduce debt and preserve assets, not just to defend against foreclosure or try to prevent the liquidation of all your assets including your business and home. Reduce debt and preserve assets, that’s the objective.
I have received thousands of visits to my SBA workout blog entry’s in the past few months and have talked to dozens of borrowers needing advice and help, most confronting the spectre of total loss and massive debt.
I have learned much in listening to their sad stories.
1. Most borrowers are getting ineffective and unrealistic advice or no advice at all. It appears that most lawyers, accountants, business advisers do not have the expertise or experience required to properly advise and workout troubled SBA loans. I can say this because the calls I get are reporting many variations of the same inexperienced advice which is frequently either incorrect, misleading, incomplete, sometimes untrue and generally dangerous to the borrowers financial well being.
2. Further, even if armed with appropriate and correct information, the strategies recommended to satisfactorily workout and resolve these loans are inadequate, failing to protect the borrower to the degree possible.
For example, I hear over and over from my callers that they have been told that :
1. SBA guaranteed loans cannot be worked out, so you had best sell your home, cash in your IRA’s and figure out how to pay them off. No!…I don’t think this is the best path for anyone.
2. The banks will not work out an SBA loan because there is a guaranty from the SBA so why should they? Wrong again, of course they will work them out, one simply needs to understand how to work the system effectively.
3. Many banks will not even inform the borrower that the SBA has an actual Offer in Settlement procedure and unfortunately many lawyers, accountants and business advisers are also unaware of this availability, let alone how to implement a strategy around this procedure that will work to your best interest.
4. Most callers are unable to find anyone who knows anything about SBA workouts so they hire an attorney who learns on the job…not good. The blind leading the blind.
Here are the simple facts.
SBA guaranteed loans can be worked out. I have worked out many SBA loans for pennies on the dollar.
We do not have to be led to slaughter as suggested by many advisers, we are entitled to present ourselves in a light most beneficial to our own needs and resolve the debt favorably, affordably and fairly. In fact this is what responsible intelligent business owners and borrowers should be doing.
There may not be many other experts out there who have done enough SBA guaranteed loan workouts to be able to provide you with the service required to do the job effectively.
Distance or location is not an issue, I have done these all over the country. The banks typically act like banks, which is predictable and the SBA has its own universal position applied similarly to all workout situations in the same general way. The rules are the same.
Call me, I will give you the right answers and the best solutions, if you would like I will help you resolve these issues with hands on involvement.
It can be done. 413-584-2581 Norm will arrange a no obligation teleconference.
Hi I have an SBA siginture in my name and my X wifes name.loan that I have been making interest payments on of about &150 and is changing over to principal and interest payment of $1,044 on a balnce owing of $23,500 , I cant make this payment . I called the credit union and asked them if they could give me another year to defer the higher payments. they said they cant do that. but that I could refinance the loan for 7 years and about a $ 475 payment. But at this time I would have a hard time making that much of a payment.
What should I do?
Thanks
call Norm at my office…www.secondwindconsultants.com 413-584-2581 an he will review your situation and guide you.
we have an sba business loan on a business acquisition, was originally 1.18 million, now down to nearly 950K. we closed March 1, 2008 then everything changed. we’ve managed to make payments but have lost our liquidity as our LOC and other sources of liquidity have dried up. it is very likely we will not be able to make our loan payments in the 4th quarter. the business is viable, still bringing in 2 mil in revenue but it’s been cut in half from the 07 high. just too much debt. we’ve spent 3 years working on costs, etc. we don’t want to close the business, we just need help surviving. do we have any options besides closing down and asking to settle?
Our construction company is not currently closed, we had a 50K SBA loan that we defaulted on when the construction industry tanked. The loan was given to a collection company and as per April they held our tax refund. We have started doing business with the Federal Government and have a contract to provide goods to the army, the contract is for $55K of which $54 is to pay the actual supplier! We have a profit of $1,000. Can the Treasury Department withold the contract payment in the company’s name? we do not have the $54K to pay the supplier if they do! Please help!
I have two SBA loans; The first is the primary for $545k and the second is the LOC for $350. I have finally come to realize that the business is no longer salvagable. Most of the vendor debt is through the C corp. Only a couple have personal guarantees. The Chase business card does have a personal guarantee from us for $35k.
I set the business up as an ESOP so I could use some of my retirement funds to make a down payment for my portion of the loan. Do you have experience with ESOP’s? Is it really of any consequences as the SBA loans were garanteed by my wife and I? Further, because of my wifes income, we would likely only qualify for chapter 13 if we did file. I have relatively high erning potential as well, so it should be clear to the SBA that if a work out is made, we can make the promissed payments. How long is the average term of the work out deals you’ve done in the past with these kinds of balances?
Thanks
Mike, there is allot to talk about and not here on the blog, please call my office and Norm will arrange for a no obligation tele-conference for us to discuss your situation in detail, there is much that can be done and yes we have had much experience in this area. Lets talk. 413-584-2581
The auction company I work with does a lot of sales, nationwide, for the SBA. They’re definitely more interested in working out than repossessing from our perspective. But you’re right, its not for the faint of heart or the inexperienced, sek professional consultation.
Just wanted to let you all know: have a lawyer READ the loan docs before you sign them!
If you do end up defaulting on your loan: use a lawyer who understands SBA workouts!
Most lawyers do not know how to do this! They will just push you through bankruptcy and tell you the SBA does not want to work with you.
The bank MUST approve your offer in compromise, then it MUST be approved by the SBA. That is the order it needs to go in.
You do NOT have to give the bank or SBA ALL of your money- this is a compromise: you give them what you can, they take what they can, or you declare bankruptcy!
We had a successful Offer in Compromise, but our lawyer did not do it, we did. After reading this site I realized we should have gone through Norm so we could have done it right, and had some money to live on after it was said and done.
By the way, from start to finish it was March 2009- Dec 2009 to have it all resolved.
Good luck to you all- do NOT give up!
Took me time to learn all the feedback, however I actually enjoyed the article. It proved to be Very helpful to me and I am certain to all the commenters right here! It’s at all times nice when you can’t only be informed, but also entertained! I’m sure you had enjoyable scripting this article.
Don,
I had a pool construction company that closed over a year ago. We have 2 SBA loans. A 7a loan and an Express loan. Before we closed the FDIC took over our bank and we lost our line of credit (SBA Express Loan). For some reason the FDIC collected the 50% guarantee on the Express Loan (our LOC) before they sold it, but they did not collect the 75% guarantee on the 7a loan. The FDIC sold our loans to a junk debt buyer. LNV Corporation now owns the two SBA loans. We are close to a settlement with LNV Corporation. Someone from the SBA told me to get the correct form signed by LNV so I would be off the hook with the SBA. I think this was the Offer in Compromise form. Would this be correct and where do I get this form? So far, LNV Corp has just said that they have nothing to do with the SBA and that is my problem. I will not settle with them without their signature on the correct form. Will this really relieve me from any collection from the SBA? I will be filing bankruptcy anyway, but if we can be relieved from the SBA my wife will not have to file.
Thanks,
Dave
Hi there,
First I want to say how great your website is and how helpful it has been.
My husband and I started a coffee drive-thru business a couple of years ago and because of certain circumstances had to shut it down. We owe the bank approx. $58k. We do have some assests that they can repo but it will probably only get them maybe 10-20K. We can get about 20k also to pay them off. Do you think this sounds like a reasonalbe offer? We are going to be 90 days late on the loan payments as of Feb. 1st. The loan officer said he was sending it to their special assets department in December but I haven’t heard anything back from them yet. It is an SBA loan. I really just want to get it taken care of instead of it hanging over my head and stressing me out. Is it up to the bank to take the offer or the SBA?
Thanks so much for your time in advance.
Britt
Brittany,
You must initiate the process, ask for the Offer in Compromise forms and state your offer, it sounds more then reasonable but it is impossible for me to tell without evaluating your financial condition.
Donald,
I left a message for Norm last week but have not heard back from him. I really just have a couple of questions and was wondering if you could help. If not, I guess just let me know that too. I am trying to settle with this guys as we speak and am just trying my best to represent myself well.
Thank you so much.
Thanks for the above info and your website. I have an SBA Express Loan with Inovative Bank (originally 10,000….but approx $ 6500 when it went in to default). I received a recent letter that it had been sent to SBA and if it is not taken care of by Feb 6, the will refer it to the Treasury Dept. What is the likelihood of this happening and what happens if they do? I had a business that I was forced to shut down and I have no assets of any value. Thanks in advance.
They absolutely will do this, they will lien you, garnish wages and wait you out. if you have a home they will lien that as well. Do an offer in compromise and get it gone. Ask your banker for the forms.
Do I request the forms from the SBA or from Innovative Bank? Thanks for your help.
from your banker.
Sorry for all the questions, but what all is a reasonable/typical offer on an amount like this?
Thanks for sharing this helpful article. Wish that you will maintain doing useful post like this. I will be one of your regular reader.
thanks, glad you enjoyed it, there are more on the subject check it out.
Do you have a phone number we can call to discuss workout with the SBA. Our loan was purchased from the FDIC by a junk debt buyer and they will not discuss the SBA. We are in settlement negotiations wiht the lender but I fear if we settle with them they may then seek a payoff from the SBA on the guarantee. Then the SBA will come after us later. I need to talk to someone at the SBA before I agree to settle with the lender. A contact number would be appreciated. Thanks, Dave
Yes of course, 413-584-2581 Tell Norm I asked you to be put right thru… Don, we will talk tomorrow. Call after 11:00.
I would like some help. I have, since emailing you, done more research and keep hitting brick walls and have an overwhelming feeling of doom. I am convince that business owners have no humanity and are in league with Satan. (sorry, I digress) Back to the SBA…I would like a workout solution.
Is there a chance I can get started on a reduced payment plan to resolve this debt? Do I need to contact SBA directly? What are my options? Can I delay payment until I am employed again? I have no job, no income, no company. And other creditors as well harassing me – thus the Satanic comment.
there are many options, all of which require some cash. You need to make an offer in compromise, but this too requires an ability to fund it…
I have an SBA loan for a business which has failed. Are there any “workout” options for this scenario? I am NOT interested in walking away, or bankruptcy. I would like to pay it back if possible. My sponsoring bank has suggested doing a workout thru them. They said i would be investigated for fraud and turned over to the Dept of Treasury? Are these scare tactics?? Which is my best option? Personal loan via the bank, or trying to work with the SBA?
its a scare tactic, we do offers in compromise every week and this does not happen, it is a program sponsored by the SBA of course its a viable option…call if you would like some help…413-584-2581
Donald,
I owned an electrical contracting business in indianapolis for about three years as a 50% partner with another guy. My partner had a general contracting business that went bankrupt and he did not pay us the subcontractor approximately $130K and this basically put our company out of business. My partner and I have since split up and are disolving the business completely after this tax year and going our seperate ways.
The problem is that we have an SBA loa for approximately $50K that is now behind payments by two months. I have a business attorney and he simply tells me that I am out of luck on the loan since I signed a personal guarantee on it. The problme that I have with the situation is that my ex partner although having gone business and personal bankruptcy did not take any of the electrical contracting business debt in with his company debt. I feel that since this happened, he is responsible for his half of the SBA loan.
He has since started another company and is starting to make money from it and since I have assetts I guess that I am on the hook for the whole amount.
Last week I called the collection department with the bank (National City) and had a discussion with them about negotiating a settlement. They informed me that with SBA loans that they are not negotiable and that I needed to pay the full amount. I have taken out a loan on my house in good faith to pay every one of my vendors and subcontracts off and am down to just the SBA loan and an electrical parts house. I need some direction and help if it is out there. I would be jumping throug hoops if I could write a check today for my half or maybe a little more and be done with it. I feel that National City should exercise their right to go after my partner for his half since he did not take the electrical company in his bankruptcy.
Please keep in mind that he did have a few hundred thousand dollars in debt with National City that he did take into bankruptcy both business and personal. This is where the sticking part is…
Please help!
I will call you unless you call me first…
Mark 317-753-9739
Call Norm at 413-584-2581 Norm will arrange a tele-conference for us to discuss this at greater length.
Don
Brokers have abused the SBA loan program by forging the information on the applications. this results in higher defaults which in the long run makes everyone lose. it is very important that all SBA applications are filled with correct information.