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    1 Reply Latest reply on Nov 30, 2009 12:05 AM by

    SBA Loan Default: How To Get Back On Track Scout
      (Distressed Loan Advisors offers expert advice about SBA loan modifications and the Offer In Compromise process, and can be reached at

      So you recived a letter from your lender which the words that would make any business owners shudder on fear: YOU ARE IN DEFAULT.

      Now what?

      1) Don't Ignore It. The worst thing you can possibly do at this point is stick your head in the sand and pretend that the issue does not exist. Yes, it's a scary thing to think about. Yes, talking to a collections agent or workout specialist can be stressful. But are either of those things as bad as having your store forcibly closed? We'd argue that watching your business equipment be auctioned off for pennies would be more difficult than talking to your banker.

      2) Create A Real Plan Of Action - If you are in default, and you want an opportunity to get back on track, you need to dazzle your lender with you plan of attack. If you simply shrug your shoulds and blame the economy for your inability to pay your bills, you are going to be toast. Think big, because big problems require big solutions. Start looking for business partners who have cash, sell a major asset to raise cash, cut your bloated salary. You are in survival mode, which means that you need to get lean and mean!

      3) Get Your Financials In Order. Bankers are nerdy number crunchers by nature, and nothing annoys them more than a borrower who can comply with a simple request for financial statements. In addition to your tax returns, take a few minutes and do a bang up job on your PFS, schedule of notes payable, financial projections, and YTD financial statements. This is your future! This is not the time to casually fill out a form like you are doing a leisurely crossword puzzle.

      4) Stop Making Excuses. When you talk to your bank, it's fine to explain that the economy is tough. But there comes a point when the bottom line is this: can you pay? If not, it really doesn't matter WHY you can't pay. It's not your bankers job to figure out why you can't pay them. Either you can pay them, or you can't. If you pay, you live to fight another day. If you tell your banker that you have no money, they simply have no reason to let you stay open. Vent to your friends and family, not your banker. They don't want to hear it.
        • Re: SBA Loan Default: How To Get Back On Track
          Follow up comment:

          Many small business owners with SBA loans come to me stating that they want to settle their SBA debt so that the business can continue on with less debt. Unfortunately this is NOT an option. One of the main criteria that makes a borrower eligible for an OIC is that the business MUST be close, and all business assets MUST be liquidated. So it boils down to this: either you can stay open at the existing debt level, or you can close the business and sell your asets, but you can't do both.