SBA or Small Business Administration
Loan Settlement

Bankruptcy Alternatives

There is a lot of misinformation regarding Small Business Administration loan settlement as banks want to intimidate you into paying more than your business can afford, and your lawyers and accountants typically have little experience in this area to help you. Since an SBA loan is a Federally guaranteed debt, people wrongly assume that you cannot file bankruptcy to discharge the debt and worse yet that it cannot be settled outside bankruptcy.

This is wrong, as an SBA loan is just like any other business loan that you would obtain from a commercial lender. The participating bank issues the loan, but the banks’ losses are guaranteed by the government (up to a certain percentage) if you default on the loan. The debt is held by the participating lender and can be negotiated directly with them once you default on the loan. But there are some traps and pitfalls that you must be aware of that we have learned how over many years working out SBA loans.

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The bank and thus, the SBA, will aggressively pursue all your business and personal assets and liquidate everything it can to reduce the debt if left to their way.

If you do not take action on your defaulted SBA loan, things can get ugly for you.

If the participating bank “charges off” your loan to the SBA, negotiations can get even tougher. The Small Business Administration is a part of the US government. When you default on your loan and fail to reach a resolution with your bank, the bank will turn your case over to the Department of Treasury. The Department of Treasury handles the collection of all Federal Debts including student loans, tax debt and yes, defaulted SBA loans. At the Department of Treasury the debt will be significantly harder to workout, so you want to avoid getting this far without a resolution with your lender.

You want to be proactive with your lender from the first sign of trouble, but it is a delicate balance. If you are too cooperative, a lender will take advantage of you and collect an unreasonable amount from you or even violate your rights as a debtor. If you are too difficult to work with, the lender may just choose to litigate and force you into liquidation. We understand this difficult balance and will represent you effectively when dealing with a defaulted SBA loan.

Our goal is to understand your needs as a business owner and provide the right solution in your loan workout. We will stop harassing creditor calls and negotiate a resolution for you directly with the lender that preserves your business, helps your cash flow and settles your personal obligations. You can continue doing business.

If you are struggling with SBA settlement, please request a free consultation with our office today.

SBA Offer In Compromise Settlement

The SBA Offer in Compromise is the term assigned to a program developed by the Small Business Administration to help business owners that have defaulted on their business loans. When appropriate, the SBA will release loan guarantors of their liability if presented with a compelling reason why it is unlikely the SBA will ever get paid. To be successful, you need to know the written as well as the un-written guidelines. We have represented hundreds of borrowers in settling their debts with the SBA, so we are familiar with the process and can help settle your liability quickly, affordably and without bankruptcy.

When an SBA loan is written, it is given to the underlying business. When your business fails or closes down, you as the guarantor of the loan are held liable for any remaining balance after your business closes. The bank and SBA can begin to pursue your personal assets unless you take some immediate action. The lender can foreclose on your home or other property, garnish wages, levy bank accounts or other assets. To prevent such paralyzing actions, you need someone to help you navigate these tricky waters. But because there is no memo, book or website to turn to for help, you’ll need a professional who can ensure your package is reviewed, accepted and that the lender doesn’t take aggressive actions.

Second Wind submits over 100 successful SBA Offer in Compromises a year and frequently arranges for settlements with a no interest payment plan. With a successful negotiation of your guaranty, any liens against real estate are removed, judgments are marked satisfied or withdrawn, and the guarantors are forever released from their liability. In short, we can help you move on with your life.

To learn more about what Second Wind can do for you regarding your guaranteed debt to the SBA, please request a free, no-obligation consultation with us. If you want to learn more, please read the following articles that discuss SBA offers in compromise in more detail.

Business Debt Settlement

A business facing reduced revenues can only make up for the strained cash flow in a few ways. Usually, the business owner will reduce overhead first, then cut their own salary or put additional assets into their company. If these measures are not enough, the business usually will begin to slow pay trade creditors and eventually incur larger debts with their creditors.

These business debts can have a very detrimental effect on the company if lawsuits start flying or if an essential supplier cuts your credit off so you cannot order goods or services that are critical to you. In these situations, you need a plan of how to deal with mounting debt in order of highest priority.

The good news is that the majority of trade credit is unsecured. You have a lot of leverage with these creditors, and you can fight your way out with the right strategies. A combination of debt settlement, reorganization and recapitalization might be necessary for your business. These are all services we provide and can assist you with in the event your business payables get out of control. We will show you the right strategies for prioritizing your troubling business debts, stop creditor harassment and remove the debt from your business with our reorganization and debt settlement strategy. Request a consultation today to learn more about what we can do for your business if you are struggling with unsecured debt.

Mortgage Debts

Mortgage Debt has become a troubling issue for many businesses over the last few decades. With the expansion of business credit in the small business arena, many small business owners decided to purchase business real estate assets rather than renting. However, the financial crisis put many of these business owners “underwater” on their investments, and the decision they once made to own rather than rent is weighing down their business.

The “Sale-Leaseback” strategy is one we often employ in these situations with our clients. If the business property can be rented for less than the carrying cost of the property, it would be a wise decision to dispose of the “underwater” real estate assets and free the business from the shackles of this debt. This is the result we aim to achieve. However, cross collateralization and cross guarantees ofter make this situation difficult for most business owners, so they decide they cannot do it. This is not the case – we handle the disposition and reorganization of real estate assets for our clients as well as the settlement of any related personal guarantees.

Often we handle the settlement and negotiation of liens on personal real estate resulting from the default on a business debt. We do not handle mortgage deficiency judgments or underwater real estate issues related to residential debts. Our practice is primarily focused on helping businesses succeed and removing liabilities for the individual business owners, not consumers.

If your real estate “investment” is starting to weigh your business down, it would be prudent to explore your options with us. To learn more about what Second Wind can do for you regarding your guaranteed debt to the SBA please request a one hour, no obligation consultation with us.

IRS & State Tax Debts including 941 Payroll Debts

When a small business owner is experiencing a cash flow strain, they are willing to go to any extreme to save their business. We understand this reality and see many business owners continuing to operate their companies while failing to pay their 941 payroll taxes. Usually, it is the very last resort, and it will come after they have already emptied their retirement accounts, cut their personal paycheck and defaulted on other liabilities. They believe it will only be temporary, and the will “catch up later in the year” but that day never comes and the liability to the IRS grows larger and larger.

This is a huge mistake, and you should never build up a 941 payroll tax liability. The tax will be assessed against you personally in the event your company fails, and worse yet, you cannot discharge it in bankruptcy. Your only saving grace might be a settlement with the IRS through the “Offer in Compromise” program, but it certainly is not easy.

When your company fails, the IRS will look to the individual officers of the corporation and assess the liability against you as the “responsible party.” Since you were the one who made the decision not to pay the taxes and turn the funds over to the IRS, you will become responsible for the amount on an individual level. Once the tax is assessed against you personally, the liability can be considerably higher than the original amount “in trust” so you need to be proactive to settle this before the liability grows higher and higher. The penalties and interest are outrageous.

Many of our turnaround and debt settlement clients have tax liabilities that we guide them through. However, we will not take on a client strictly for an IRS tax settlement. If you have other debt issues in addition to your 941 tax problems, we should have a consultation. Otherwise, there are many resources available that can help you settle your IRS liability on your own. Take a look at this resource from the IRS to learn more.