Friends,

If you are reading this post, you undoubtedly have an SBA guaranteed loan and are having problems with it.

Please read this post and a number of others  listed and linked below. You will learn a lot, as there  is much misinformation being spread about which borrowers are relying upon. Sources for reliable information are almost non-existent. This may be the only available source for real reliable information.

One must be knowledgeable to launch a meaningful defense and a powerful offense.

Start here, then call me.   There are many more posts in this blog regarding SBA defaulted loan workouts, read them, learn what can be done, then call us.

SBA guaranteed loan workout myths….do not believe everything you hear

Do you need a lawyer for an SBA workout?

SBA Loans can be dangerous. Be careful.

Do not feel bad about defaulting on your SBA guaranteed loan, your covered.

SBA workouts, bank workouts, all workouts,  are a business negotiation, not a legal issue.

Debt workouts…, too good to be true?

Co-signing a guaranty to the SBA or any note. What does it mean?

Yes, the seemingly impossible is possible! SBA workouts can go very well indeed. Two recent examples.

Surprise! No negative credit issues from defaulted SBA guaranteed loans!

…call Norman, in my office, at 413-584-2581. He will arrange a no-obligation tele-conference call for us to discuss your issues and I will suggest a possible action plan and the results you may anticipate.

No matter what you have heard, defaulted SBA guaranteed loans can be resolved favorably for the borrower.

Call me we can talk about it.

An SBA guaranteed loan workout…what can be done?

There is this urban lore that I frequently hear that claims that SBA loans cannot be worked out, paid off short with a compromised conclusion and with forgiveness of the shortfall.

It ain’t so. It can be done. I do it for my clients. (see, Yes, the seemingly impossible is possible! SBA workouts can go very well indeed. Two recent examples.)

It is difficult, as with any workout negotiation, and one must have a clear understanding of the SBA’s rules and requirements, however it can be done successfully if the situation is handled correctly and the timing is correct.

In fact the SBA (Small Business Administration) has its own Offer In Compromise forms, and will negotiate a settlement  indirectly,  through your corresponding banker.

That’s both good and bad as its both the bank and the SBA that must be satisfied and each has its own rules and requirements. But in the end it’s the SBA that controls the results, although it’s the banks you talk with and that makes for some confusion as frequently the bank or its attorneys are not telling you the truth…at all. I hear stories about misinformation everyday!

The SBA does however have some strong requirements that are fast and hard and must be understood to avoid wasting time and being frustrated.

1.  The SBA requires that the breaching business no longer be operational when an offer is made. This is also an important part of the strategy and must be evaluated very carefully as to how this is handled in order to serve your own best interest. This is not cut and dry but subject to many important and valuable options. The business may continue if  handled effectively.

2. All the business assets must be liquidated. This is another important part of a workout plan, which must also  be handled appropriately and can be accomplished in your own best interests. Liquidation takes many forms.

3. A significant legal effort by the bank to recapture any potential cash must have been implemented before an offer will be contemplated. In other words  the bank must exhaust its legal remedies and all the collateral must have been liquidated before a negotiation for the shortfall can occur. There is some flexibility here, and this is a very important area of great concern, as many homes act as collateral for the loans and yes they can and will be liquidated if this issue is not handled correctly.

4. All the guarantors, including your spouse if he/she signed the guarantees must deal with this issue effectively and completely. If not a spouse, then  each guarantor sinks or swims on their own merits. If the debt is guaranteed by both husband and wife, there are greater difficulties  which must be worked out effectively and can be, mainly the marital home.

Each guarantor other than husband and wife, must file his or her own offer in compromise and create their own negotiation settlement.

Frequently this also becomes a source for negotiation as we want to resolve all the issues in one global resolution for all parties involved. This can be a challenge.

Keeping in mind, that the bank actually lent you the money, in most situations the SBA merely guaranteed the payback up to 80%, but since the SBA will pay the bank, they require the bank, as its agent, to exercise all due diligence and to exhaust its legal remedies to collect as much as possible or the bank may potentially violate the terms of the guaranty and lose the payback guaranty. This is the source and reason for a tough bank collection practice and a no compromise attitude.

Your lending bankers support and cooperation is important in developing a successful workout, and without a good banker relationship a good workout conclusion is harder to achieve. A third party expert can play a very effective role in this situation.

The overall principles remain the same, maximum collection under the financial circumstances of the borrowers situation, clearly however this is subject to interpretation and effective presentation.

It takes time, approximately 6-8 months. The SBA is a political beast and over the years, depending on various political issues, they can be easier or harder to workout loan shortfalls.

At the moment I believe the SBA is suffering many losses thus they want to stem the flow of loss, but their mission is to support the small business owners, the borrowers, so the results are mostly depending upon the quality of the preparation and presentation, tough, I would say.

The SBA and the banks are very busy and reviews files in the order they are received. They typically ask for additional information, once under review, to better understand the financial condition of the guarantors and thus it can be an extremely long procedure, which can take many months,  to conclude. The first offer is universally rejected, demanding a higher offer which many applicants provide. There are alternate strategies which work more effectively then simply raising the offer.

Once rejected, I have had success in modifying the offer further, the “second wave” negotiation I call it, adjusting the terms and conditions and even lowering the payoffs further than previously offered, based on the realities of the borrowers condition because of the long passage of time, more erosion of the borrowers financial condition can occur,  and adjusting the terms of payback resulting in a lower offer as a response.

This second pass is very important and can yield extraordinary results.

You know were you are headed before anyone else, thus planning is critical for the best outcome for the borrower. Preparation for a workout is critical for the best results.

Definitely hire someone experienced and therefore knowledgeable regarding the practices of the SBA and such workout scenarios and it will all work out for the best for you. Do not experiment, do not do it yourself, do not listen to advice from the bank.

Additionally, there are sometimes serious potential tax consequences regarding workouts and forgiveness of debt which can be quite devastating and must be considered throughout the workout negotiation, or one runs the risk of solving one problem while creating another almost as large. Remember debt forgiveness is converted to ordinary income for IRS purposes and ordinary income calculations. There are many exceptions available, there are strategies around this issue.

I would be delighted to review your case and without obligation make recommendations.

Call Norm at  413-584-2581 he will arrange a no obligation tele-conference. We can discuss your specific circumstances and design an effective strategy that will yield the best results. You can proceed with it or I can implement the plan on your behalf, that’s your decision once you are  more knowledgeable about what the possibilities may be.

I await your call.

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