Straight Talk on Navigating SBA Liens
Alright, let’s dive into this. So you took out an SBA 7a loan
and probably used your personal home as collateral, right? It, more than likely, seemed a fair deal at the time. You get your business funding, and the bank gets some assurance. But what happens when the business falls through and the loan defaults? Suddenly, that SBA lien feels like a rather large, uncomfortable elephant in the room.
explains more about an SBA Lien.
What You Should Know About Collateral Requirements and an SBA Lien
Alright, how this goes is that the SBA’s SOPs (Standard Operating Procedures)
lay down the rules for the banks lending on behalf of the SBA. If you’re the business owner, they’re going to ask you to co-sign. The SBA isn’t in the business of providing loans without collateral; they want the bank to secure that loan to the maximum amount feasible.
This means that if your business assets aren’t enough to cover the loan, the lender will look to secure additional assets. Unfortunately, your personal real estate properties, like your home, can be used as collateral.
Now, here’s an interesting thing: the SBA deems a loan as “”fully secured”” only if the bank has obtained enough assets to match the loan amount on a “”liquidation value”” basis. They measure this “”liquidation value”” as a reasonable estimate of how much the bank can retrieve by selling your collateral after deducting all the associated costs.
How the Collateral Equation Works
Just to give a clear picture, suppose your business assets total a liquidation value of $10,000 but your home equity stands at $50,000. In this situation, both the bank and SBA will ask you to put your house up as security for the loan. However, there’s a silver lining — the SBA may not ask for your house if your equity is less than 25% of the fair market value.
The Nitty Gritty of Collateral Liquidation
What happens if your laundry list of “”ifs”” turned to “”has””– and your business has defaulted on the loan? Well, now the bank will start cashing in on that collateral, your home included.
Basically, they’ll be looking for anything with a “”Recoverable Value””. In simplified terms, if they can get $10,000 from it, it’s up for sale unless they’ve some pretty darn compelling reason not to.
The Foreclosure Predicament
Here’s where things become complicated; if the SBA lien is on your personal home, you’re looking down the barrel of a potential foreclosure. It’s a necessary measure the bank takes to sell property that was pledged for security purposes.
Now, since the foreclosure laws for real estate properties, from mortgages to deeds, vary by state, the bank will have to apply the appropriate method. Most times, this leads to two possible paths of foreclosure, judicial or non-judicial, depending on the specifics of the SBA lien.
The Treatment of Personal Homes
This might seem dire, but keep your chin up, as all might not be lost. If you’ve not engaged in any unlawful activities involving fraud, misrepresentation, or financial impropriety, then a lender should exercise good faith efforts to reach an agreement that might include releasing the SBA lien or compromising on the SBA loan balance before seizing your home.
If the lender abides by applicable state or federal rules that require them to work with homeowners before foreclosure, then it is seen as a significant indication of good faith. So all hope may not be lost, even if an SBA lien has your home in its grasp.
Can You Still Save Your Home?
Coming to the million-dollar question, can you save your house from the SBA lien? According to the SBA – yes, but you’ll have to pay for the privilege. Your payment should be equal to or more than the “”Recoverable Value”” of your home, and its release shouldn’t compromise the lender’s ability to recover the loan amount.
Need Some Guidance?
Navigating through an SBA loan default is tricky at best, but don’t do it alone. If you find yourself in a predicament, consider calling Solve Debt Relief. Their expert team led by Todd Spodek has dealt with such cases and they know the ins-and-outs of the process.
What You Stand to Gain with Todd Spodek and Team
Solve Debt Relief boasts a track record of successfully-solving cases involving millions of dollars in SBA Debts. They do it through methods like Offer in Compromise and Negotiated Repayment Agreements. The best part? They do this without their clients having to deal with bankruptcy or home foreclosures.
They have also successfully defended against Treasury Debts and are authorized by the Agency Practice Act to represent Federal Debtors Nationwide before entities like the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
So, you’re not just getting legal advice; you’re getting seasoned, battle-hardened allies in the fight against your SBA and Treasury Debt Problems.