Critical Questions You Should Inquire About SBA Loans
What is the worst that can happen in case of an SBA loan default?
It is not advisable to default on SBA loans because of the severe consequences involved. Your house or property can be put up for foreclosure as long as it has equity in it. Your business can be closed down and all of your office items sold. 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. For instance, if somebody has defaulted on paying his or her SBA loan, the creditor is limited to handle the issue up to the point when he feels that all paths leading to the loan recovery have been exhausted.
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. 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 Creditor has not gotten back to me with regards to my SBA settlement offer. Am I off the hook?
Likely not. 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. You should however not think for a second that because they are not responding to your emails or calling you back that you’ve slipped through the cracks or that they have granted 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 you realize that your creditor keeps throwing roadblocks and always blames the SBA, then he has not dealt much with SBA and is not aware of the SBA offer in compromise or simply does not want to settle.