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. They can foreclosure your home if it has equity in it. They can even go as further as shutting down your business and sell all of your equipment. They might also opt to subpoena you for information and might even be arrested if you don’t respond to the subpoena in time. 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. 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.
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. Usually, a letter is written by SBA to the Guarantors and borrower concerning 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 bank has not gotten back to me with regards to my SBA settlement offer. Am I off the hook?
No. This is because many banks are usually busy because of the ever-growing economy. There are too many documents, and not enough hours during the day to give attention to each file coming to their desks. 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 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 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.