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    3 Replies Latest reply on May 28, 2009 6:51 PM by NoBullFunding

    SBA Backed Loan Question for Business That May Have to Close

    PhxSmallBiz Newbie
      I own a small business in Phoenix. I purchased the business with an SBA backed loan which closed in October of last year. As with a lot of small businesses I am having to reevaluate my business plan due to the economic down turn. One of many options would be a complete shut down of the business. I see this as a last resort but I would like to know all of my options in making an educated decision. I met with my accountant this evening to go over our finances and she informed me that if we closed the business the SBA could call in my loan. If it comes down to closing the business my intention is to continue to make the SBA payment as scheduled monthly. Is it a possibility that with the business closed the SBA could come to me and ask for the full payback of the loan given that I am continuing to make my payments on time and the loan was collateralized with my home? My husband and I have some cash saved & in the bank for a rainy day and are terrified at the prospect of having that money attached to this loan. NO PART of our plan involves filing bankruptcy or defaulting on the payment. Does anyone out there know if it is possible for the SBA to call back a loan & if so what options we have? This was NOT disclosed when we closed on the business and I feel duped if it is true. We would have found other financing options even if it meant a higher interest rate if that was the case.
      Any educated opinions would be greatly appreciated; I am doing the best I can to be a responsible business owner but I need to know all of the facts. Thank you so much for your help.
        • Re: SBA Backed Loan Question for Business That May Have to Close
          phanio Pioneer
          Yes, if it is written in the loan docs or as part of the UCC on your home - they can do whatever was agreed to in the loan docs. This is a great point for reading before you sign - you should always take your docs to an attorney before signing - the banks and the SBA are looking out for themselves and so should you.

          Don't feel duped - it happens to a lot of people - your best bet is to try to find a way out.

          Have you taked with your banker about your options - your best bet is open communications with your banker - they may have programs to help you out. Also, visit the SBA's website and search for there new programs to help SBA borrowers - part of the stimulus package.

          You might also think about looking at other lenders to see if they have programs that can take out this loan - try to get a take out that does not encumber personal assets.

          lastly, instead of closing - can you sell the business to another - for the amount you owe?

          Business Money Today
          www.BusinessMoneyToday.com
            • Re: SBA Backed Loan Question for Business That May Have to Close
              PhxSmallBiz Newbie

              Thank you for responding. I can't help but feel a little duped since it wasn't disclosed prior to closing. With all of the research that I did before purchasing a business I didn't know that we could see the loan called if we closed the business.
              I will contact my banker to see what options there are out there for us. Do I run the risk of having the bank prematurely call the loan by being forthcoming?
              Unfortunately we cannot sell the business for what is owed right now; like a lot of companies we have seen the discretionary income of our consumer base dwindle.
              I appreciate your feedback.
            • Re: SBA Backed Loan Question for Business That May Have to Close
              NoBullFunding Scout
              I'd be happy to discuss this with you. I work as a loan workout specialist for SBA loans, so I literally deal with situations like yours every day.

               

              A few thoughts off the top of my head:

              First of all, its important to note that some of the process is driven by the lender who is servicing the SBA loan, not the SBA. Some lenders come after you with a vengeance, some take a softer approach. It even varies from person to person within the same lender.

              With regards to your home, you should check your loan docs and see if there is a mortgage on your home as part of this loan. (Note: There is no such thing as a UCC on a home.) If your home secures the loan, and if your loan is in default, they lender/SBA has the right to foreclose if they want to. However there are a number of ways to avoid having your home foreclosed on.

              If your loan is current, and you continue to repay as agreed, the chances are VERY small that they'd come after you or call the note, even if you close the business.

              Please feel free to email me at nobullfunding@gmail.com. I offer advice for free, no strings attached.