Beware Of Banks Shortening Their Default Requirements
To date, the general benchmark for banks to call SBA guaranteed loans in payment default has been 90 days, at which time the festivities begin in earnest. The lawyers are engaged, the note is deemed in default and called, and the liquidation of collateral by foreclosure and auction begins.
Keep in mind that the bank’s guaranty from the SBA is dependent upon exhausting their legal remedies to liquidate collateral when the borrower is in default. Once the process begins there is no talking to them, only responding to the legal process which leaves you little room to change their course of direction.
We have a strategy that does change this process dramatically, however, it is best initiated prior to the implementation of foreclosure. (Although, it is not fatal to our plan if foreclosure is initiated.)
The new reality is the banks are now ratcheting up the default point. Some banks now consider 90 days too long to wait. In one instance we experienced recently, a bank began their process a mere fifteen days after failure to pay a monthly installment. Fifteen days!!!
The leash is shortening which means you must respond far more quickly to the assault or, when you wake one morning shortly after failing to pay, you may find your business assets in the liquidation process and facing foreclosure. This is not universal yet, but I am seeing this pop up more and more and I anticipate it being a growing trend.
There is still a process to unfold that requires photographing assets, appraisals, and making demand, etc. However, the banks are beginning to awaken to the many months being wasted while nothing happens – including debt service payments from the borrower – and so the banks are beginning to eliminate this spread of inaction.
Do not be lulled into complacency, expecting many months to unwind while nothing is being done. Those days appear to be passing quickly and you can now expect the assault will begin almost immediately. Since you know well in advance that you will soon be defaulting, it behooves you to make plans in advance. Determine exactly how you are going to deal with the foreclosure and liquidation process and, of course, the resulting personal guaranty attack.
When you come up with “no plan” call us immediately. We can save your personal and business assets from foreclosure and liquidation.
Norm,
Can you tell me where I can find the workout talent pool? Is there an association that is more likely to have individuals with SBA and workout experience?
Appreciate your response.
Hi Norm-
I have about $25K that I haven’t talen down yet as part of my SBA loan. I also have $90K in an unused credit line from the same bank. The $25K will basically cover debt service for the next year. Should I take it down now and then initiate workout discussions or initiate discussions first? We are in the process of trying to find a buyer for existing assets right now. Thanks so much.
The subsequent time I learn a blog, I hope that it doesnt disappoint me as much as this one. I mean, I know it was my option to learn, but I really thought youd have one thing fascinating to say. All I hear is a bunch of whining about something that you possibly can repair in the event you werent too busy in search of attention.
Really Gaynelle? and you read how many posts and really believe your comment is supportable? Ok, each tom their own, I thank you for your effort and candor and wish you the best. No point in you reading me any more.
Don
Thank you for your interest, and I am delighted to inform you that you have found the source you are looking for. Our organization is probably the only one of its kind that focuses on resolving SBA guaranteed debt. We concentrate on all bank secured debt that is in default, however SBA guaranteed loans are predominant.
There is no pool of talent or association that I am aware of that would provide you with a list of names that do SBA workouts.
Please read our blog as there are dozens of articles on SBA workout strategies , the only source of such information. We conduct business all over the country and are very successful at reducing debt and preserving the business and personal assets that are collateral for the loan.
I would be delighted to discuss your situation on a no obligation tele-conference and recommend you call Norm at my office 413-584-2581 he will arrange it. We will provide you with solutions.