Post a new topic
    5 Replies Latest reply on Jul 13, 2010 10:04 PM by Anderson1978

    SBA loan in default three months ago

    nicolej_15 Newbie
      I took a 15k loan from sba and have about $11k more to pay. I have defaulted 3 months ago cause I can no longer pay them as my business completely stopped genereating income.

      I applied on one of the settlement program to hadle this. What risks have I taken and what are the chances that I will be succesful in dealing with them. I was told that my account will soon be forwarded to Treasury Department. What will be the consequences of this to my family and my future?
        • Re: SBA loan in default three months ago
          Barky Dog Tracker

          Hi nicolej_15,

          So sorry to hear about the failure of your business. :-( It's such a tough economic climate out there. You are definitely not alone.

          Question- did you put up any personal collateral for the loan, such as your house or cars?

          According to an SBA document I read- if you receive a loan, and do not make payments as they come due, SBA may take one or more of the following actions:

           

          • Report the status of your loan(s) to credit bureaus
          • Hire a collection agency to collect your loan
          • Offset your income tax refund or other amounts due to you from the federal government
          • Suspend or debar you or your company from doing business with the federal government
          • Refer your loan to the Department of Justice or other attorneys for litigation
          • Foreclose on collateral or take other action permitted in the loan instruments.

          Also, it would probably be money well spent to have a reputable CPA or Lawyer give their opinion regarding your loan default.

          Please be very wary of any company that promises to "negotiate the loan on your behalf" to a smaller amount. If you do consider using one of these companies, make sure you check them out with the Better Business Bureau and also conduct an online search of the company name and its executive's names for complaints.

          Best of luck,

          Barky_Dog
          • Re: SBA loan in default three months ago
            phanio Pioneer
            The actions that your bank can take are outlined in your loan documents - read those over - look for the defult section. Don't just think that a work out firm will handle everything - the bank and the SBA will come after you - especailly if you signed a personal guarantee.

            Your best bet is call your bank and start talking to them - let them know your situation and see if they can provide a work out.

            What happened with your business? Do you know where it went wrong?

            Business Money Today
            www.BusinessMoneyToday.com
            • Re: SBA loan in default three months ago
              JasonTees.com Scout
              Possible consequences include:

              • Judgements against any remaining guarantors
              • If a judgment is granted, they could seek to place judgment liens on your personal property
              • They may enroll you in the Treasury Offset Progam where they will take any future tax returns you file for and apply it to your loan balance
              • Charge-off on your credit report
              • Collection calls from a collection company engaged by the Treasury
              • Wage garnishment

              Your best bet is always to be proactive and talk to them and try to work something out. They won't let you settle for an arbitrary % of the loan amount...you'll need to demonstrate that you truly don't have the capacity to pay.
              • Re: SBA loan in default three months ago
                Wayfarer
                You know it's interesting that you defaulted, no offense. The SBA's approach to lending is so twisted because they foresee these defaults in the first place. Under the Asset Recovery Capital(ARC) Loan program they came out with in 2009, they set aside $256 million to give to small businesses. This was intended to stimulate the economy and preserve jobs. However, they budgeted a predicted default rate for 56% of all the loans. Yes, 56%. An article on it can be read here: http://www.businessweek.com/smallbiz/content/jul2009/sb20090716_067184.htm

                So let's look at the sequence of events:
                1. Borrower takes out a loan from the SBA
                2. SBA predicts 56% chance the loan will default
                3. Borrower defaults
                4. The default damages the borrower's credit
                5. Borrow's income tax refund is offset to pay back the debt
                6. Collateral is foreclosed on

                Substitute 'SBA' with 'Tony Soprano' and tell me this storyline doesn't look familiar.

                 

                • Re: SBA loan in default three months ago
                  Wayfarer
                  I found a set of good articles on the topic of SBA loan default....looks like they were written by the jason tees who posted a reply above

                  http://jasonteescom.wordpress.com/2009/10/16/the-sba-offer-in-compromise-debt-settlement-101/