• Tue, Feb 06, 2024
  • What Happens When You Can't Pay Your SBA Loan?
  • Biz_photos_(9)
  • Link to Article:  What Happens If You Can’t Pay Your SBA Loan? – Forbes Advisor

    If you miss a payment you are considered "delinquent".  Lenders will typically give you three or four months of leeway if you fall behind.  Nonpayment after three of four months is considered "default".

    Standard steps taken by SBA lenders upon default:

    1. Lender attempts debt collection.
    2. Lender seizes the collateral on the loan.
    3. Lender seeks repayment from the borrower.
    4. Lender seeks repayment from the SBA Loan Guarantee Program.
    5. SBA seeks repayment from the borrower.
    6. Borrower submits an offer to the SBA to settle the loan default.
    7. SBA seeks collection via wage garnishment, tax refund offsets, or other means.

    How to avoid default:
    1. Communicate with the lender immediately if you become delinquent.  Lenders do not want to foreclose on the loan and will try to work something out with you.
    2. Potential work-outs with the lender may include renegotiating loan terms, refinancing the loan, or obtaining assistance from the lender to help improve business operations and cash flow.

    The key to managing delinquency and avoiding default on an SBA loan is to form a strong bond with your lender and alert them to any potential cash flow concerns.

    If you have any questions about the SBA loan process, please feel free to reach out to me.

    Eric J. Gall
    [email protected]