What happens when a bank refuses to grant debt forgiveness and accept an Offer in Compromise for an SBA guaranteed loan?.

Lets review. As we know, the defaulted borrower of an SBA guaranteed loan must present his Offer in Compromise to his lending banker for review and ratification and then for him to send it over to the SBA for final consideration.. If deemed acceptable and appropriate it is then sent over to the SBA were it is decided with a response to the borrower being: yes, no, or a counter-offer is provided.

However the real issue arises when the banker says No, rejects the offer in compromise and never submits it to the SBA for  final consideration.This happens frequently and is a potential problem.

What then? As we are stuck in the mud if we cannot get to SBA for final consideration of the Offer in Compromise.

Typically the banker believes there is more equity available, or additional assets that can be liquidated or that the offer is either too low or outright frivolous under the existing circumstances.

We have had this occur and we can do two things to counter this.

1. Continue to negotiate and offer more until you reach the bankers level of satisfaction. This will require you determining what the issues are which is also a problem as bankers typically will not tell you  ‘not wanting to negotiate against himself’ and simply demanding more. A possible nightmare.

2.  Second approach is to request the banker to submit the 0ffer without his support and recommendation. This is likely to result in a rejection by the SBA but gets you into the system and allows a direct negotiation with the deciding committee, and a possible resolution. It could also be sent back to the banker to resolve which may result in more cooperation from him in an effort to put closure to it.

In the end, it will probably require a higher bid, but in view of massive forgiveness, a little more may be affordable.

Tenacity, focus and follow through is needed when this happens and eventually your offer will be considered. It is best to have a third party represent you throughout this process as more cooperation and information can be gleaned by the third party then by the borrower. The borrower is always considered the bad guy, the third party representative is neutral and can frequently get better results.

Call us if you are stuck. 413-584-2581 Norm will arrange a teleconference for us to discuss a strategy.