Navigating Your Way Around SBA Loan Payment Default

Look, it’s not always smooth sailing in business. Cash flow can become a roller-coaster ride and paying off your loan might suddenly get rocky. If you’ve secured an SBA loan, courtesy of our friends at the U.S. Small Business Association, you know what I mean. They’ve designed these loans to ease you into business by pairing you with lending partners, who share the risk and lend you the capital. However, if you find yourself struggling with your SBA loan repayment, do not despair. Lawscape, and the squad at Lawscape are here to help.

The Aftermath of Defaulting

Let me break down what could happen if you miss your SBA loan payment. Being even one day late on your payment, and boom, you’re termed delinquent, with late fees affixed to your loan payment. Consistently late? You could default, and that sends your lender into aggressive recovery mode. They could round up your business assets for sale and worse, your personal assets could follow, especially if you used them as collateral. It’d be like a game of dominoes after that. The lender calls upon the SBA to foot the bill for their portion of the loan, and the SBA comes knocking on your door. If you can’t clear the debt, your case escalates to the Treasury Department, and suddenly, your future tax returns and wages are in limbo. You need to avoid such an outcome if possible.

Being a Responsible Borrower

So, how do you stay on the right side of the SBA loan repayment? By being sensible about your funding needs. Take a deep dive into your business finances and figure out how much you can comfortably repay. Think this through properly

Bump Up Your SBA Loan Payment on Your Priority List

Owing to the dire repercussions that can follow defaulting, it’s a great idea to prioritize your SBA loan payments. If you default, you may have to say goodbye to your business assets. To ensure your business stays afloat even under financial strain, pay off your SBA loan debts first.

Manage Your Business Expenses

Perhaps you’re in a period of tepid cash flow, scan your business expenses. Can you cut back somewhere and direct the extra cash towards your debts? If you’re stretching your budget to expand your business too rapidly, maybe it’s time to pull back your expansion plans. Prune off additional services or consider ways to save money on utilities. Review the bulk of your expenses, can you make adjustments to reduce them?

Consider Liquidating Assets

Having trouble keeping up with your loan repayment? Ramping up sales would be desirable, but let’s face it, boosting income isn’t always a stroll in the park. Consider selling some of your assets, like equipment, to rake in extra money. Sure, it isn’t the best option, but defaulting will force you to sell them anyway. Control the selling process by doing it independently rather than being compelled to.

Have a Chit-Chat With Your Lender

When you sense a tight squeeze with your loan repayment, don’t wait for your lender to give you a buzz. Pick up the phone, ring your lender, and lay your difficult financial situation on the table. By addressing the issue early, you increase the chance of facilitating an agreeable arrangement between you and your lender. Particularly, if your financial quagmire is temporary. Should you default or become delinquent, don’t dodge your lender or the SBA’s calls. Tackling the situation head-on can lead to constructive solutions.

Seek a Modified Repayment Plan

Your lender may propose a modified repayment plan to steer you clear of defaulting. Likely, the terms may favor the lender, but it can rescue you from the financial wreckage that defaulting can induce. Since the SBA has a stake in the loan, though, they would need to greenlight these modifications.

Offer in Compromise

Now, If you default and the SBA initiates debt collection, you could suggest an Offer in Compromise. This could be your lifesaver, keeping you out of court. To execute this, you’d need to furnish the SBA with your financial details, including tax information, income, expenditure, any asset transfers to third parties, plus specifics on all your assets.

Seek Legal Assistance

If you’re staring default in the face, having a proficient SBA attorney by your side can assist in securing an optimal outcome. They can guide you through the necessary steps and assist in making an Offer in Compromise that gets the thumbs-up.

Prosper With an SBA Loan

Managing your SBA loan effectively can help eliminate the risk of financial disaster while enabling you to grow your business. Remember: Be proactive when the going gets tough, and borrow responsibly.

At any point, if you’re on the brink of defaulting on your SBA loan or already there, feel free to contact us at Lawscape to explore how our SBA Services can help you reconcile your debt.

Why Join Forces With Lawscape for Your Treasury or SBA Debt Issues?

For starters, we’ve helped resolve millions of dollars in SBA debts via Offer in Compromise and Negotiated Repayment Agreements, and all this without any of our clients having to file for bankruptcy or face home foreclosure. Moreover, we’ve successfully defended millions of dollars in Treasury debts through AWG Hearings, Treasury Offset Program Resolution, Cross-Servicing Disputes, Private Collection Agency Representation, Compromise Offers, and Negotiated Repayment Agreements. To top it all, our top-shot attorneys have the green light by the Agency Practice Act to represent Federal Debtors nationwide before key agencies including the SBA Office of Hearings and Appeals, SBA, Treasury Department, and the Bureau of Fiscal Service.