SBA Loan Default: Is the SBA Beefing Up Enforcement?

Don’t face issues related to Small Business Administration (SBA) loan defaults alone. Give Lawscape at the Lawscape a buzz. We unpack complex issues, like the tricky tax offset program, SBA loan foreclosures, and crafting an effective response to an SBA demand letter.

The Lawscape is like your no-nonsense, sharp-minded buddy who happens to know a ton about SBA loans. We’ve got your back, no matter how chaotic your situation appears. We can walk you through a slew of questions. Like, “How does one actually draft an appropriate response to an SBA demand letter?” Or, “What on earth is an SBA loan foreclosure?” And who can forget the million-dollar question often asked at dinner parties: “What exactly is a tax offset program?”

The Big 7(a) Loan – Not Just a Number

You may have heard a Republican senator shooting questions about whether the SBA’s 7(a) loan program has been playing too fast and loose with taxpayer money. You know, because everybody likes their government loans with a side of proper administration.

This Senator is Jeff Sessions from ‘Sweet Home’ Alabama. He penned an open letter to Maria Contreras-Sweet, the new SBA Chief. He’s assertive, saying the SBA “hasn’t risen to the gold standard required in doling out loan guarantees.” He specifically took a shot at the agency’s 7(a) lending program. This program is like a small business loan’s fairy godmother, guaranteeing up to 85 percent of the value of small business loans dished out by private lender banks.

Sessions scrutinized the SBA’s 7(a) loan program, backing a cool $17.9 billion in non-real estate loans in the year ending September 2013. He didn’t just eyeball those numbers; he went digging deeper. He dug out reports from the press and the SBA Inspector General — these reports revealed eye-wateringly high default rates on 7(a) loans gifted to franchise owners (think Quiznos and Cold Stone Creamery). According to Sessions, this is a model where, if the business flops, the lender still pockets a profit while taxpayers mop up the mess. Basically, a lose-lose situation for taxpayers.

To Franchise or Not to Franchise

In the senator’s letter, he put forth 17 demands, narrowing down on the rather alarming franchise loans: “Has the SBA given certain franchises the cold shoulder due to high default rates? What default rate percentage would cause a franchise to be axed? If the SBA doesn’t give franchises the boot based on default rates, does the SBA believe it has the authority to do so?” He’s probing, and we’re all curious about the answers.

The letter drops a hint that maybe the SBA should slough off more risk to the banks. It also nudges the SBA to spill the beans on any banks that have been blacklisted from SBA programs for funding an unmanageable amount of bad loans.

Loose Ends and Oversights

The Government Accountability Office (GAO) located a pattern last September. The SBA tends to jumpstart new programs sans “information needed to assess their performance,” according to the tireless auditors. Even pilot programs deserve a closer look, Sessions asserts.

If you have a defaulted SBA loan, don’t fight this battle unarmed. Hit us up immediately at 1-212-460-5004 for a FREE case evaluation.

So Why Choose the Lawscape with Your Treasury or SBA Debt Problems?

Well, we’ve squared away Millions of Dollars in SBA Debts through Offer in Compromise and Negotiated Repayment Agreements. In other words, we’ve helped our clients avoid dodging bankruptcy trustees and sidestep home foreclosures.

We’ve defended Millions of Dollars in Treasury Debts through hearings, resolving Treasury Offset Program issues, arbitrating Cross-serving Disputes, representing Private Collection Agencies, making Compromise Offers, and hammering out repayment agreements.

Our attorneys are empowered by the Agency Practice Act to represent indebted federal clients across the nation, before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service. When it comes to matters this intricate, you’ll want us on your team.