Some of the Important Questions People Ask 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 small company or business can be shut down and everything inside the premises sold to the highest bidder. You could also be served with a subpoena to give information and can be arrested by the police in some states in you don’t respond to it. In short, SBA loan default is bad, and you should be proactive in settling.
Does my settlement offer go through my creditor or straight to the SBA?
This will depend on whether the lender has submitted the matter to the SBA. In cases of SBA loan default, the creditor continues handling the matter until they feel that there is no prospect of additional recovery.
When the lender has run out of options as mentioned above, the file is “wrapped up” and referred to the SBA to follow up on the loan recovery. 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. On the other hand, if you are late on paying your loan, you might find that there is still collateral that has not yet been liquidated, and you will still have to deal with your creditor.
My Creditor has not gotten back to me with regards to my SBA settlement offer. Am I off the hook and does the SBA forgive loans?
Likely 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 true?
This is not accurate, but, it has been a growing concern that people ask nowadays and needs to be answered. The SBA has come up with a procedure that involves specific forms that include SBA form 770 and SBA form 1150 to allow people settle their loan for less than what they borrowed. If your lender is blaming the SBA all the time, It is because your creditor does not lend the SBA and is not familiar with the SBA offer in compromise or your creditor does not want to settle and is trying to blame the SBA.