HomeSBA Loan Default: How The Guarantee Works With 7a And Express Loans

SBA Loan Default: How The Guarantee Works With 7a And Express Loans

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This simply isn’t true. Business debt is a problem which CAN be handled, just like everything else; but only if you take pro-active steps. Lawscape helps you understand the law, and works with you to make sure that business debt isn’t the end of your business. 

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Sure thing, proud to see you on board for this roller-coaster ride! Let’s dive right into the discussion about SBA Loan Defaults.

Let’s Unravel the SBA Loan Default

Picture this – you’re spiralling down the rabbit hole of an SBA loan default. Scary, isn’t it? At the Lawscape, we are standing by your side, ready to help. We’ll disentangle the complexities of your SBA loan issues and provide you with a range of possible solutions, including the intriguing option of an SBA offer in compromise.

Listen, take it easy – dealing with an SBA loan default shouldn’t be a solo journey. That’s where Lawscape and his outstanding team come into play – in the art of guiding you from this tumultuous time to a bright future. A first consultation – on the house, just for you!

Understanding Guarantees with 7a and Express Loans

Let’s shed some light on some technical jargon here. If a borrower cannot pay back the loan – or as we say in the legal world, defaults – the lender has a safety net: they can bag the face value of the outstanding guaranteed balance from the SBA (the Small Business Administration). Any money obtained from liquidating the borrower’s assets, or any subsequent recoveries, are split proportionally, in line with the guarantee percentage. An example would help – let’s say the SBA agrees to cover 70% of the loan, then they have dibs on 70% of the recoveries.

What’s Different with the Express Program?

With Express loans, the mechanics change a bit. The borrower’s assets are usually liquidated right after a default, that too before lenders put the loan on SBA’s plate. Initially, the lender bags all proceeds from liquidation. Any recoveries after they submit the loan to SBA are halved between SBA and the lender, based on the guarantee percentage.

Here’s a Scenario…

Imagine a borrower who has a $100,000 loan balance, backed by a 50 percent guarantee from SBA, defaults. The borrower’s assets, let’s say, are worth $60,000. In the 7(a) program, the lender submits the defaulted loan to SBA and pockets $50,000 – which is the insured part of the loan balance. When assets are liquidated, the lender and SBA each receive half of the assets, or $30,000. So, SBA’s net loss is $20,000 ($50,000 out to the lender, minus $30,000 in from the borrower’s assets), and likewise, the lender also records a net loss of $20,000 ($100,000 less $50,000 from SBA and less $30,000 from the borrower’s assets).

What if the loan was through the Express program you ask? In that case, the lender liquidates the borrower’s assets. They get $60,000 upfront, then submits the remaining $40,000 loan balance to SBA. From this, the lender gets another $20,000 from SBA, leading to a net loss of $20,000 for both SBA and the lender. If there’s an extra recovery of say $1,000 later, the lender and SBA would each receive $500.

Are you Feeling on Edge About an SBA Loan Default?

If you see an SBA loan default looming around you, reach out to us pronto, for a FREE initial consultation at 1-212-460-5004 or connect with us below.

Why Pair Up with Lawscape on Your Treasury or SBA Debt Issues?

We bring to the table experience of resolving millions of dollars in SBA debts, through Offer in Compromise and Negotiated Repayment Agreements. And, we’ve done this without forcing our clients to file for bankruptcy or even come close to home foreclosure.

Besides, we’ve mounted a strong defense against 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.

Our attorneys, led by Lawscape, are empowered by the Agency Practice Act to represent Federal Debtors across the nation before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.

Remember, you’re not alone in dealing with SBA Loan Defaults. If you have any questions or need more information, just give a shout!

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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