I’ve  talked to many MANY small business owners who’ve entered into SBA guaranteed loans.  I’ve represented scores of them in working out defaulted SBA guaranteed loans and I often come up against ‘borrowers remorse’, a condition that most borrowers experience.  They  feel really bad about not fulfilling their obligation, not satisfying their commitment and defaulting on the loan, breaking their promise to repay.

I have great respect for the belief that we should all fulfill our commitments, honor our word and do what we say we will do.

Sometimes however circumstances beyond ones control forces a small business owner’s dream to fail.  An economy that has melted down is one example of circumstances that no individual business owner could have prevented.

Universally I find that small business owners stop at nothing to succeed, including investing every penny they have, borrowing as much as they can from wherever they can, working without taking a pay check, and putting in many many long hours.  They do their best to succeed and want nothing more then to be able to pay their obligations, but sometimes they simply come up short.

Now we know that when you go to the bank and ask for help, the answer is basically ‘no deal’.  No help, the SBA does not allow adjustment to the terms, the banks are prevented from making any really meaningful modifications.  In fact the SBA requires the bank to exhaust their legal remedies to collect and liquidate the collateral to satisfy the note, and unless the bank performs effectively they may lose their SBA guaranty.  Thus, when things go wrong, you are in deep trouble with no opportunity to work things out safely.

The most they will do is 3-6 months of interest only payments, no real help at all -if your problem were only that simple.  They will then move to liquidate your homes and everything else you own in oder to satisfy their legal requirements.

It’s not a matter of ‘fair’, it IS however what you signed up for and thus it is what it is.

However, there is one aspect that the borrower is seldom reminded of and it is what I consider the equalizer…

Perhaps you do not recall -so let me remind you- that you paid a significant fee for the SBA guaranty.  That was a a purchase of INSURANCE. INSURANCE for the bank to receive the guaranty to cover the bank’s losses should you default.   So when and if it happens, when circumstances occur that prevent you from paying, you have already paid for the INSURANCE to cover the losses the bank would have experienced.

So why do you feel so bad about being unable to pay?  Why destroy yourself and your family’s financial future to honor your word when you have purchased insurance to cover you for such losses? It is seldom the negligence or personal failure, it is typically uncontrollable events.  And since everyone involved is aware of the possibility of this business failure happening they require you to purchase protection for the bank.

Despite this business insurance the bank is still required to liquidate your business and personal assets as best as they can in order to claim the insurance payoff.

After the bank has hung you out to dry THEN they put their hand out to the SBA for the guaranty…which you paid for.

The problem is few small business owners know how to navigate through this mine field and emerge safely.  The bank will not tell you what is best for you.

Call me for help, there is a path.  Call us at 413-584-2581 Norm will arrange a no obligation conference for us to discuss your options and a way to survive.

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