Closing any business for most Entrepreneurs is a very difficult task. Unfortunately with this economic Tsunami it is happening all across the county. Many businesses are being destroyed by reduced revenues, increased overhead, and crushing debt. As a result of these problems, unfriendly or fatigued lenders may exert additional pressure on a company by advancing rates, requiring additional reserves, or charging default rates of interest. So one thing leads to another and its either sell the business, close the business, or foreclose on the business. Any of these things still leave the business with the original SBA loan debt that was personally guaranteed when signing for the loan.
A major reason for the SBA to require a personal guarantee is to provide incentive for the owner to stay involved in the transaction after the default in a workout scenario. These workout scenarios include either a payment plan, or an “OIC” Offer in Compromise. The OIC allows you to make a settlement offer for a small portion of the debt which can save bankruptcy, judgements, liens, and foreclosures on property. With a government that is so dependent on debt reduction and debt forgiveness, a generous settlement is usually the best way go. Today, success is about a second chance after a significant Debt workout, resolving a defaulted SBA loan, or a foreclosure by a bank or whatever debt is challenging your existence.
A few things to keep in mind if you know the business is going under is DO NOT be a ghost and hide from the local bank. Most business owners have a tendency to run and hide. Having a banker who likes you is a very valuable asset. Having a banker who dislikes you can make settlement discussions difficult or impossible. Return Calls, letters, and emails. It could mean the difference in settling or having a judgement against you.
The next thing is to save your pennies for that upcoming settlement offer. You can only make a settlement if you have something to offer, so once you know for sure you will be closing start putting away cash and looking for ways to raise cash for that offer. Friends, family, private loans, and credit cards are typical cash sources. The final thing to know which is VERY important is determining what the best strategy is for that settlement. Some people choose to try it themselves, and others hire a professional company such as Bridge Management. It is an important factor to know what is most likely to be approved by your lender and the SBA. There is nothing more disappointing to a borrower when they do everything that the bank asks, only to have their settlement offer declined because they didn’t know the parameters of the OIC process going in, and didn’t have a backup plan.
We all make mistakes and get in trouble one time or another in the business world. Just be assured that there is solutions to these SBA issues that will provide a second chance for an entrepreneur. Whether it is the IRS, your bank, The SBA, a secured or unsecured creditor, it makes no difference, there is effective workout plans and strategies that can implemented to correct the situation completely without bankruptcy!