You Won't Believe This SBA Story

You won't believe this SBA story, it's not as easy as it looks, a Katrina loan.

We just heard back on a small SBA workout, a small case we took because the woman needed protecting and we felt we needed to help her out.

She is a retired school teacher and had a family business, a used car parts business, prior to Katrina. She and her husband borrowed approximately $75,000 to support their business. The business was totally destroyed during the Katrina disaster. The resulting losses include secured bank debt, credit card debt and significant vendor debt with some carrying personal guaranties, and of course their personal guaranties on the SBA debt, now in default.

Her husband now earns approximately $24,000 annually, hardly enough to keep these people in their home and with food on their table. He was previously supported by the used parts business which he ran.

Confronted with this difficult situation, they asked us for help, as they were in danger of losing everything they had this late in their lives. We have favorably resolved all the debt excepting the SBA disaster loan…for which we offered $ 2500, without even knowing exactly how they would raise and pay that amount.

We just received back their response to our Offer In Compromise submitted to the SBA , an SBA program,… presumably based on what a person can afford to pay back, and their response of $2500. was rejected. This is not unusual as then there would be the normal negotiation, however there response demanded full payment of every dollar owed.

This is the silliest result imaginable. These people can barely afford the food on their table, and the SBA cannot accept an affordable offer in compromise as the best option available?

Utterly amazing. They have apparently lost their minds. We have had millions forgiven in other offers and in this situation the SBA expects every penny to be returned?

We are working on this and I am certain we will resolve this issue favorably for the borrower. But I ask why should this be so difficult a process? It makes little sense? Why would they demand an impossible return? What happened to any of the promised the support for the small business owner, shall we force them into bankruptcy and the possible loss of their homes? Is that the objective of the SBA? I certainly hope not. I will let you know what happens.

‘It ain’t as easy as it looks, Ethel’.

We have worked diligently on this workout and have simply come to learn and understand that the SBA for some unfathomable reason will not allow a reasonable debt forgiveness workout on disaster loans. Apparently these suffering people will not be afforded the same opportunities as defaulting borrowers of standard SBA guaranteed loans. How sad. How unreasonable.

We did however rest victory from the jaws of defeat by convincing them to allow a payoff of $100. per month…forever, seemingly, as this is a paltry amount and really quite affordable, although not the conclusion we would have preferred.