SBA Loan Application Fraud
Remember when you filed your SBA loan application? Remember the slightly exaggerated statements you included? That’s OK, but if it was the extreme pushing of values, the assets you really don’t have, that’s NOT OK. Maybe your parents really own the vacation house and it is a family retreat to be yours one day but you actually don’t own it now. Or the assets your wife actually owns… she isn’t signing the application or guaranteeing the loan, remember?
Well, no harm done you thought at the time, but now when you are in default, the first thing the SBA or bank does is pull it out and examine the assets looking for opportunities to liquidate and collect and now all of a sudden the assets are not really yours. It is clear to the examiner (or will soon become clear) that a misstatement was made, one that can now be construed as fraud. “Fraudulently inducing the loan” as they call it. This act is punishable by 4-7 years in the can, minimum required sentencing. These are the federal guidelines.
Obviously, this can be a problem. We have confronted this issue before and if not dealt with effectively, it can get quite ugly and quite expensive. Unfortunately, a moment of innocent misstatement (or so you thought) from years ago cannot be undone now. If it is there, it’s there, but how it’s handled now can make a world of difference.
If this is part of your background, it is best to get in front of it and disclose the issue before it is discovered, admit the mistake and deal with it. Here is what will happen: You will recommend to the bank that they pretend the asset is yours and consider the equity available for liquidation and you will pay in the value of the equity as if it was yours, thus making the situation right. This is far better than saying, “Sorry, it isn’t really mine, I made a mistake so that asset and its value is really not available now.” This is fatal.
It happens, but it is a costly error of judgment and we must pay for our mistakes. This price is far better than a long, long vacation in jail.
I would also recommend that a third-party represent you and not a lawyer as the further you are from the legal arena the better off you will be. A financial consultant can take the bullet for you and resolve this matter in the best interest of the bank and you, making it possible for you to survive and still get beneficial results in the workout. Remember, you must include the value of the stated assets, or suffer unimaginable consequences.
Check your application and the financial statements you submitted when you applied for the loans. It may surprise you. This is not that an uncommon a mistake or lapse of judgment.
