Critical Questions You Should Inquire About SBA Loans
What’s the worst thing that could happen to someone if he or she defaults on SBA loan?
Nobody should even think of defaulting on SBA loan because of the severe consequences they would face. Your house could end up being put up for foreclosure if it has equity. Your business can be closed down and all of your office items sold. They can find a personal judgment against you and serve you with a subpoena of which you will need to explain and respond on time before they send the police to arrest you. Therefore, defaulting on SBA loan is not good for you considering the consequences mentioned above.
Does my settlement offer go through my lender or directly to the SBA?
This will depend on whether the lender has submitted the matter to the SBA. For instance, if somebody has defaulted on paying his or her SBA loan, the creditor is limited to handle the issue up to the point when he feels that all paths leading to the loan recovery have been exhausted.
Once the creditor reaches that point, he has no option but to refer the matter to the SBA for further collection efforts. Usually, a letter is written by SBA to the Guarantors and borrower concerning the loan. Upon receiving such a letter, you are free to deal with SBA directly when settling your loan. On the flip side, if you have defaulted on your loan recently, there’s still collateral that hasn’t yet been liquidated, and you will most likely have to continue dealing with your lender.
My lender has not gotten back to me with regards to my SBA settlement offer. Am I off the hook?
Probably not. This is because many banks are usually busy because of the ever-growing economy. There are too many files and fewer hours to work on them during the day. Lenders might not be in a position to call you or respond to your emails because of the nature of work they are doing, but it should not be mistaken to mean that they have offered you SBA loan forgiveness.
My bank told me that because my loan is guaranteed by the SBA, they cannot settle. Is that accurate?
No, however, it is a question many people have asked before and is worth addressing. The SBA has been proactive and has come up with a procedure that can help borrowers settle their loan for less the amount they had borrowed by filling certain forms that include SBA form770 and SBA form1150. If you realize that your creditor keeps throwing roadblocks and always blames the SBA, then he has not dealt much with SBA and is not aware of the SBA offer in compromise or simply does not want to settle.