What is an SBA Loans Default?
SBA loans actually are made to help any small business to start and get running. It can in fact be risky, which is the reason why the federal government helps entrepreneurs who have troubles in getting a loan under normal circumstances. This is in fact helpful to our economy.
The SBA does not really make the loans itself, but it helps to make it possible by giving you guarantees on the loans which are made by the other lending institutions. The thing that happens in case of a default is to where the lending bank contacts you and then explains the details about the default and to how you could give remedies to it.
In case you are unable to make the necessary payments, the lender starts their collection process as what was being stated on the loan agreement. This also includes the sale of the assets that you used in order to collateralize the debt. It actually includes business assets and if you will get larger loans, this may include even your home. A lender can in fact close the business and they also may foreclose the property.
When it reaches a point where the lender had used all of the options on the recovery process, they can actually make claims to the SBA. During this time, the SBA guarantee kicks in and that the federal government will be the one to repay the share of your loan for you.
Once that the lender has been paid, you are then going to deal with the SBA. You will get a notice coming from the SBA which will explain that you will need to pay the remaining balance or perhaps present an “offer in compromise”. This situation means that the SBA is going to review your financial situation and may accept less than what’s being required. The secret in this case is where you should present a settlement amount which is substantial but needs to be sustainable as well. The SBA in fact has no interest on payment plans which you cannot meet.
When the SBA has accepted your offer, all sides are going to be happy because you are able to make the repayments. In case the SBA is going to reject the offer, you will be given the opportunity to recalibrate and for you to submit again. There are instances sometimes where the SBA sends the account to the treasury department. In such cases, the treasury department have different options.
You actually have the option in settling the loan with the treasury department, but it’s a tedious task to do. This in fact is why it is far better to look for early solutions when the loan is still at its original lender.
After settling on the debt, you will be able to move forward again and focus on the recovery process of your financial health.