A You Need to Know About SBA Loans
What’s the worst thing 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. They can foreclosure your home if it has equity in it. Your small company or business can be shut down and everything inside the premises sold to the highest bidder. They can find a personal judgment against you and serve you with a subpoena of which you will need to explain and respond on time before they send the police to arrest you. Generally, defaulting on SBA loan is not advisable and you ought to be on time when settling it.
Does my settlement offer go through my lender or directly 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.
Once this stage is reached, the lender is left with no choice but to forward your file to the SBA for further follow up on how to settle this loan. The borrower and guarantors will get a letter written by SBA with regards to the loan. This letter is a clear indication that the lender is no longer involved in the negotiations and you are free to deal with SBA directly. Let’s say you have defaulted your loan payment over a couple of months, and your collateral might not have been liquidated, you will, therefore, still need to deal with your lender for a while.
My bank has not gotten back to me with regards to my SBA settlement offer. Am I off the hook and does the SBA forgive loans?
Probably not. This is because many banks are usually busy because of the ever-growing economy. There are too many documents, and not enough hours during the day to give attention to each file coming to their desks. Lenders might not be in a position to call you or respond to your emails because of the nature of work they are doing, but it should not be mistaken to mean that they have offered you SBA loan forgiveness.
My bank told me that because my loan is guaranteed by the SBA, they cannot settle. Is that true?
That is not true, but it is an important question that many people with SBA loans ask and needs to be addressed. The SBA has come up with a procedure that involves specific forms that include SBA form 770 and SBA form 1150 to allow people settle their loan for less than what they borrowed. If your bank is always blaming the SBA when it comes to settling these loans, the chances are high that they have never lent the SBA and don’t know what the SBA offer in compromise entails or they just don’t want to pay up.