Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Experienced SBA Debt Defense Attorneys Helping Businesses and Guarantors Resolve SBA Loan Defaults
Defaulting on an SBA loan can jeopardize everything you have worked to build. Our Philadelphia SBA loan defense attorneys work to get your SBA loan back on track; reduce your monthly payments; settle your SBA loan for less than the balance; defend against SBA, lender, and Treasury lawsuits and foreclosures; and protect your assets and income from government collections. Whether you are struggling with an SBA EIDL, 7(a), 504, or Restaurant Revitalization Fund (RRF) loan, we can help.
Harborstone Law represents businesses, owners, and guarantors throughout Pennsylvania and nationwide* who need experienced legal guidance for defaulted SBA loans over $75,000. If you are trying to save your business, negotiate a settlement, defend a lawsuit, or assess your potential personal liability, contact us to evaluate your options.
Unlike many commercial lenders, the federal government has extraordinary collection powers. Once a loan defaults, the lender, the Small Business Administration (SBA), or the U.S. Department of the Treasury may pursue aggressive collection against both the business and the individual guarantors. Depending on the loan and your circumstances, collection efforts may include:
The earlier you seek legal advice, the more options you may have.
Every SBA loan case is different. Our attorneys analyze your situation and develop a strategy to minimize your financial exposure while protecting your assets whenever possible. The appropriate strategy depends on numerous factors, including:
We offer tailored strategies for resolving defaulted SBA loans, including deferment, reinstatement, installment plans, loan modification, offers in compromise, and debt and foreclosure defense. See below for more details:
Temporary financial setbacks do not necessarily mean a business is beyond saving. If your business is facing temporary cash-flow problems, declining revenue, supply-chain disruptions, or other financial hardships, we may be able to negotiate temporary payment relief with the lender or the SBA. A temporary deferment or forbearance may provide valuable time to improve cash flow, complete pending projects, secure new financing, sell assets in an orderly manner, and avoid default.
Although most COVID-era hardship programs have ended, you can get your loan back on track in many cases. Our attorneys negotiate directly with lenders, the SBA, the Treasury, and their representatives to seek reinstatement of your defaulted SBA loan. Reinstatement typically requires the borrower to catch up on any arrearage.
Attempting these negotiations without legal representation can be difficult, especially once the loan has entered default. Contact experienced counsel before negotiating on your own.
Some defaulted SBA loans may qualify for an SBA installment agreement, which can reduce your payment by extending the repayment terms.
Other SBA loans, particularly those secured by commercial or residential real estate and obtained through a bank, may qualify for a loan modification. A modification may reduce your payment, lower interest, and extend payment terms.
Not every borrower qualifies, but an experienced attorney can help you determine whether an installment plan or a modification might be viable.
Some businesses qualify for refinancing through conventional lenders or other financing sources. Unfortunately, refinancing often takes time, and collection activity may continue during that period.
Our attorneys can communicate directly with the lender or the SBA while refinancing is underway to help prevent unnecessary collection actions and preserve your opportunity to complete the transaction.
Many borrowers are surprised to learn that both the SBA and the Treasury have Offer in Compromise programs. An Offer in Compromise allows qualifying borrowers and guarantors to settle their SBA debt for less than the full balance in appropriate circumstances.
Depending on your financial condition, negotiations may reduce the principal balance, interest, penalties, and collection costs. Each offer requires careful preparation and supporting financial documentation. Not every Offer in Compromise is accepted, but a poorly prepared submission is far more likely to be rejected. We will thoroughly analyze your financial situation and prepare an Offer in Compromise designed to give you the best chance of resolving the debt.
Important
Quick Note: Many borrowers wait far too long before considering an Offer in Compromise. Interest, penalties, attorney's fees, and collection costs continue to accumulate during the delay. Exploring settlement options early may significantly reduce the total amount ultimately paid.
Once an SBA loan is referred to the U.S. Department of the Treasury, collection efforts often become significantly more aggressive.
Treasury may pursue:
Representation by experienced counsel can often improve communication with government agencies and help identify alternatives before collection efforts escalate.
The SBA, participating lenders, and the Department of Justice may file lawsuits to collect on defaulted SBA loans. The likelihood of a lawsuit increases with the size of the loan and any issues with how the funds were spent.
The SBA does not typically sue borrowers and guarantors directly; instead, it refers cases to the Treasury Department and the Department of Justice.
If you have been sued, do not ignore the complaint. Failing to respond may result in a default judgment, which gives the government additional, powerful collection remedies. Even if liability appears clear, defending the lawsuit may provide important benefits, including:
Many cases settle after litigation begins. Even so, it is important to consider how to protect your personal assets throughout the process.
Quick Note: The statute of limitations for collecting most SBA loans is six years. Generally, the federal government cannot file suit for money damages after this period. However, it is more complicated than simply counting the years from the default, which we will cover in a later blog post.
Business owners are often concerned about protecting their homes, retirement accounts, savings, and other personal assets. Therefore, each case requires careful legal analysis. Depending on your circumstances, we help clients:
Planning early is often critical.
Sometimes the best business decision is an orderly closure. If continuing operations is no longer financially feasible, we assist business owners with the following:
An organized wind-down often reduces future legal and financial exposure.
**For businesses outside Pennsylvania and Washington, DC, local counsel may be necessary to handle the dissolution of the business entity.
Quick Note: Businesses should keep the lender and the SBA informed throughout the liquidation process. Selling collateral or closing operations without proper notice may create additional complications.
Many SBA loans can be discharged or restructured through bankruptcy. Choosing the right chapter depends upon your assets, income, business structure, and long-term goals. Although we do not handle bankruptcy in-house, we have decades of bankruptcy experience and can help you decide if bankruptcy is worth exploring, given your financial situation.
SBA loan defaults involve a unique combination of federal lending regulations, commercial litigation, debt collection law, bankruptcy, government agency negotiations, and business law. Our attorneys understand how these issues intersect and work to develop practical, cost-effective solutions tailored to each client's circumstances.
If you have received collection notices, have been contacted by the Treasury or its debt collectors, are facing an SBA loan lawsuit, or simply want to understand your options before matters become worse, contact our SBA loan defense attorneys today. The sooner you seek legal advice, the more opportunities may be available to protect your business, your finances, and your future.
*Nationwide representation is available for SBA EIDL loan defaults over $100,000. We also represent clients nationwide in SBA 7(a) loan defaults of $100k or more that have been referred to the Treasury.
Harborstone Law is based in Pennsylvania with offices in Greater Philadelphia and Washington, DC.
