SBA Offer in Compromise Attorney in Arizona
When an SBA loan goes into default, the lender will first go after the collateral, if any, and then the personal guarantee. If you are a small business owner who is in default on an SBA loan and you have closed the doors on the business, an SBA offer in compromise may be your best bet.
What is an SBA Offer in Compromise?
An SBA offer in compromise is essentially a package of forms and documents that you submit requesting that you be allowed to pay less than the amount of the debt, as a full and final settlement of the debt. Most people think that the offer in compromise is submitted to the SBA itself. After all, the offer in compromise is put together on Small Business Administration (SBA) forms. But that is not the case.
Submission of Offer in Compromise to Lender
SBA loans are actually made by private banks, not the government. The government (SBA) is only a guarantor of the loan. So the offer in compromise actually gets submitted FIRST to the lender. The lender then reviews the offer and either approves or rejects it. Sometimes, the lender will ask for more details or even more money. In any event, the lender must first approve the offer in compromise before it is sent to the SBA for approval.
Factors in Whether an Offer in Compromise Will be Accepted
There are a variety of factors your lender and the SBA will consider in deciding whether to approve an offer in compromise. And it is not as simple as just filling out some forms. The Offer package needs to be both truthful and persuasive, something our firm excels at. Here are some of the factors that are considered:
• The borrower’s ability to pay. This is perhaps one of the most important factors. Since most SBA loans have a personal guarantee, this means that the borrower’s personal wealth, income, assets, etc. will be considered.
• Applicable exemptions. What would the lender actually be able to collect on if they pursued you?
• Cost and time involved in enforcing litigation and judgments against the borrower.
• Personal health, economic and hardship considerations.
It goes without saying that any attempt to misrepresent your situation to the lender or SBA could have grave consequences. Nevertheless, a thoughtful and skilled SBA attorney can put together a package Offer in Compromise that has the best chance of success.
What Kind of Results Can You Expect?
We can never guarantee a particular outcome and anyone who says they can is not telling the truth. There are many facts and circumstances that make your situation unique. However, it is our experience that SBA loans can and are settled for a fraction of the debt balance when done right. The SBA prefers a lump sum settlement and this is our preference too. But in some cases, a payment plan may be appropriate.
The SBA knows a certain percentage of loans will default – they expect it. And there is a process for dealing with the debt through a formal Offer in Compromise. But the process is not simple or easy. It takes a skilled attorney to strategically navigate the system and advocate your position to obtain the best possible results.
We help clients settle SBA loan defaults, including Offers in Compromise. Call for a free consultation.