HomeAnatomy Of An SBA Loan Workout

Anatomy Of An SBA Loan Workout

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The Nuts and Bolts of an SBA Loan Resolution

So, you’ve landed in a bit of a pickle with your SBA loan, haven’t you? I understand that these things happen. Now, did you know that the SBA SOP 50 57 talks about something called a ‘workout’? It’s basically a strategic negotiation between you, the debtor, and your creditor, to plot the best course of action and put right your debt.

For a peek at the process, check out this nifty explainer video: [Anatomy of an SBA SOP 50-57 Loan Workout](https://www.sba-attorneys.com/wp-content/uploads/2013/07/anatomy-of-an-sba-sop-50-57-loan-workout.mp4)

There are a few common strategies for these types of workouts and they all focus on restructuring the critical terms of your delinquent loan to find a resolution. Now, the goal here is to navigate away from potentially disastrous situations like bankruptcy, litigation or foreclosure, and work towards curing the defaults to maximize the recovery potential of the loan for the creditor.

Good Faith in Loan Workouts

A key point, my friend, is the SBA mandates lenders to seriously negotiate a workout if an SBA loan is delinquent or in ‘liquidation’ status. Say, for instance, the lender doesn’t attempt to work things out, they could be stepping on the toes of essential SBA SOPs and federal regulations, which could lead to claims and compensation being denied.

It’s vital for lenders to have a valid reason documented as to why negotiations for a workout weren’t successful with an SBA loan defaulter.

The Journey to Resolving an SBA Loan Problem

So you’re having a tough time with your loan payments, and you’re looking for some form of relief – a workout seems like a plausible solution, right? But here’s something you need to keep in mind. The moment you submit a request for a workout, the lender will ask for your updated financial picture (think: current financial statement along with business and personal tax returns for the previous two years). If you don’t provide this, negotiations won’t even begin.

Once the financials are in the lender’s hands, they’ll take a close look to check if a workout is even possible. This will take into consideration your ability to turn the business around and the financial health of the business, amongst other things.

Several Paths, One Destination: SBA Loan Workout

There are several directions that an SBA workout could head in, and the lender needs to justify the option they decide to pursue. The updated credit memo they will have at hand will include an evaluation of all the financials you’ve provided.

If the workout shakes hands with feasibility, negotiations kick off immediately and the wheels of the workout plan are set in motion. No dragging feet here, the process cannot take more than sixty (60) days. If a workout agreement doesn’t materialize in this timeframe, expect the lender to enter debt collection mode which could mean anything from foreclosure to collateral liquidation or even getting the Department of Treasury involved.

Give a Little, Get a Little: The Validity of a Workout Agreement

To make things official, you’ll need to offer the lender something of value, or ‘consideration’, to make the workout agreement binding. This could involve fixing initial loan document errors, offering additional personal guarantees, rejecting affirmative defenses, releasing lender liability claims, offering additional collateral or agreeing to a summary method of liquidating the loan if the workout fails.

Now, don’t just go ahead and say ‘yes’ to every concession in a bid to get the workout you seek, without considering the implications. This is where you could lose any future leverage against the lender or SBA if the workout doesn’t work out.

Types of SBA Loan Workouts

The SBA SOP clearly lists the typical types of loan workouts, including forbearance, deferment, modification of repayment terms, and voluntary sale of collateral among others. If you’re struggling financially, requesting a workout could be beneficial for everyone involved in avoiding collateral liquidation, bankruptcy, or litigation.

Don’t Jump Into a Workout Alone

If the weight of managing expenses and meeting loan obligations is bringing you down, my advice would be to speak with an experienced SBA Workout Practitioner before putting in a workout request. Enlisting Lawscape and the Lawscape to review your loan documents and financial statements, as well as to guide you through potential legal consequences is a smart move.

Why Trust Lawscape and the Lawscape?

With millions of dollars in SBA debts resolved through Negotiated Repayment Agreements and Offer in Compromise, we’ve helped clients steer clear of bankruptcy and foreclosure. Our team of experts has successfully represented federal debtors at the SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.

Need to get out from under a mountain of SBA loan debt? Give us a call at 212-460-5004 for a free Case Evaluation or fill in our intake form for a confidential report discussing your options.

Lawscape Can Help You Manage Your Business Debt

If you’re struggling with business debt, we can help you understand your situation. During the initial consultation, we’ll go over the contract, and other legal documents you signed. After that, our firm will work with you to get a better understanding of your situation, and help you come up with a game plan that keeps your business alive. 

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Everyone has different types of business debt. What matters is that you take it seriously. Regardless of whether it’s secured, or unsecured, you need to work with a firm that understands how to negotiate, reduce, settle, and manage, this business debt. 

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