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. Your small company or business can be shut down and everything inside the premises sold to the highest bidder. You could also be served with a subpoena to give information and can be arrested by the police in some states in you don’t respond to it. Generally, defaulting on SBA loan is not advisable and you ought to be on time when settling it.
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. Whenever a person defaults on the SBA loan, the lender will continue handling your issue until they run out of options with regards to the loan recovery.
Once this stage is reached, the lender is left with no choice but to forward your file to the SBA for further follow up on how to settle this loan. Once the matter has reached the SBA, a letter will be written to the borrower and guarantors of 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 flip side, if you have defaulted on your loan recently, there’s still collateral that hasn’t yet been liquidated, and you will most likely have to continue dealing with your lender.
My Creditor has not gotten back to me with regards to my SBA settlement offer. Am I off the hook?
No. Currently, the “workout” areas at many banks have been busting at the seams. They have a lot of files from thousands of clients of which they cannot be able to go through all of them all at once. Just because they don’t contact you back or reply to your emails does not necessarily mean that you are off the hook or that they have had SBA loan forgiveness.
My bank told me that because my loan is guaranteed by the SBA, they cannot settle. Is that true?
No, however, it is a question many people have asked before and is worth addressing. The SBA has created a process, specific form like SBA form 770 and SBA form 1150 with the aim of settling the debt for less than the full balance. 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.