What’s the worst thing that could happen to someone if he or she defaults on SBA loan?
There are some very dire consequences if you default on SBA loans. Your house could end up being put up for foreclosure if it has equity. They can even go as further as shutting down your business and sell all of your equipment. 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?
It relies on if your lender has referred 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 this stage is reached, the lender is left with no choice but to forward your file to the SBA for further follow up on how to settle this loan. Once the matter has reached the SBA, a letter will be written to the borrower and guarantors of the loan. Once you receive this letter, then you have the go-ahead to deal directly with SBA when it comes to settling your loan. Let’s say you have defaulted your loan payment over a couple of months, and your collateral might not have been liquidated, you will, therefore, still need to deal with your lender for a while.
My Creditor has not gotten back to me with regards to my SBA settlement offer. Am I off the hook?
Probably not. Banks today have hectic schedules and have become a place that is full of clients and activities. There are too many files and fewer hours to work on them during the day. You should however not think for a second that because they are not responding to your emails or calling you back that you’ve slipped through the cracks or that they have granted you SBA loan forgiveness.
My bank told me that since my loan is guaranteed by the SBA, it isn’t possible for them to settle. Is that true?
This is not accurate, but, it has been a growing concern that people ask nowadays and needs to be answered. 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.