A business development officer at Pinnacle Real Estate Group, Inc., Bruce Nosanchuk possesses more than two decades of experience in commercial lending. Well-versed in negotiating with lending institutions, Bruce Nosanchuk is particularly knowledgeable about Small Business Administration (SBA) loans.
SBA loans give entrepreneurs cash flow to run their businesses, something many lenders consider risky. While the SBA does not make the loans itself, it guarantees loans given to entrepreneurs by lending institutions.
Whenever an entrepreneur is about to or has defaulted on an SBA loan, it is advisable to take steps to remedy the situation with the lender rather than wait to deal with the government. Here’s why.
When the entrepreneur defaults, the lender will summon him or her. If the two do not come up with an agreement to satisfy the lender, the lender will start executing the recovery options available. These include selling collateral assets, closing the business, and foreclosing the property.
After the lender exhausts all options available, it will move to collect the portion of the loan the SBA guaranteed by filing with the agency. The SBA will meet its end of the bargain but that doesn’t mean the entrepreneur is out of the woods. Far from it.
He or she will have to repay the SBA the money it paid to the bank. If he or she doesn’t settle the debt or provide an acceptable offer in compromise, then the SBA will forward the debt to the US Treasury Department, which has a broader range of recovery options at its disposal including garnishing wages, withholding tax refunds, and filing suit.
Businesses do face tough times. However, when the risk of default arises, it is better to reach out to the lender and negotiate an agreement that will benefit the two. Lenders will be inclined to agree if the terms are favorable to them.
