SBA Loan Liquidations

What It Is
Modifications and deferments can help a viable borrower address temporary financial challenges while continuing to repay an SBA loan. A modification may change payment amounts, interest rates, maturity, or other terms; a deferment temporarily postpones payments. Under SOP 50 57 4, deferments generally should address temporary—not permanent—cash-flow problems.

Why It Is Important to SBA Lenders
Lenders must evaluate borrower viability, document the basis for the action, and determine whether SBA or secondary market approval is required. Careful review is especially important for secondary market loans, where changes to repayment terms may require investor consent.

How Our Firm Helps
We help lenders evaluate, structure, and document modifications and deferments. Our attorneys advise on approvals and notices, maturity extensions, payment and interest-rate changes, and borrower and guarantor consents—helping lenders support viable borrowers while protecting their rights and SBA guaranty.

What It Is
A workout seeks to resolve repayment problems and, when appropriate, restructure a troubled loan to avoid more costly collection, foreclosure, or bankruptcy proceedings. Options may include forbearance, deferment, revised repayment terms, maturity extensions, assumptions, or collateral sales.

Why It Is Important to SBA Lenders
A well-structured workout may preserve a viable business and improve recovery, but not every borrower is a suitable candidate. Lenders should review current financial information, assess the borrower’s cooperation and viability, and document their analysis because the decision may later be reviewed during guaranty purchase.

How Our Firm Helps
We help lenders assess workout options and prepare agreements that address the default while preserving available remedies. Our work includes forbearance agreements, repayment structures, loan modifications, collateral and guarantor issues, SBA approvals, and an orderly transition to collection or liquidation when a workout is not feasible.

What It Is
When a default cannot be resolved, lenders may pursue collection remedies against borrowers, guarantors, or collateral. These may include demand and acceleration, Offers in Compromise, foreclosure, note and guaranty actions, deficiency collection, judgment enforcement, and receiverships. Non-Routine Litigation requires an SBA-approved Litigation Plan, subject to limited emergency exceptions.

Why It Is Important to SBA Lenders
Collection and litigation must be necessary, reasonable, locally customary, and cost-effective. SBA requirements may govern litigation plans, legal expenses, settlements, and outside counsel. For example, an Offer in Compromise requires financial and recovery analysis, and a compromise for less than the outstanding principal generally requires SBA’s prior written approval.

How Our Firm Helps
We assist with collection strategy, Offers in Compromise, litigation plans and amendments, and SBA coordination. Through our nationwide network of co-counsel law firms, lenders can maintain a consistent SBA strategy while working with attorneys who satisfy local licensing requirements and understand the applicable courts and procedures.

What It Is
Collateral liquidation converts assets securing a defaulted SBA loan into recovery proceeds. Depending on the collateral, this may involve voluntary sales, negotiated releases, UCC sales, foreclosure, receivables collection, setoff, protective or credit bids, or the sale of acquired property.

Why It Is Important to SBA Lenders
Liquidation strategy can directly affect recovery and SBA’s guaranty review. Lenders should consider lien priority, collateral value, senior debt, environmental risks, foreclosure costs, applicable law, and expected net recovery. Delays or failures to safeguard collateral may reduce value and expose the guaranty to repair or denial.

How Our Firm Helps
We develop and implement liquidation strategies that align SBA requirements with state-law remedies. Our attorneys assist with lien and loan-document review, collateral sales, UCC procedures, foreclosures, releases, deeds in lieu, short sales, bidding issues, environmental concerns, and deficiency analysis, coordinating with local co-counsel when needed.

What It Is
A bankruptcy filing immediately changes the collection landscape. The automatic stay generally pauses lawsuits, foreclosures, garnishments, and most collection activity. Lenders must then protect their rights through the bankruptcy process, including claims, case monitoring, plan review, and, when appropriate, relief from the stay.

Why It Is Important to SBA Lenders
Lenders must comply with the automatic stay, SBA requirements, and federal and local bankruptcy rules while protecting recovery. SOP 50 57 4 requires the loan to be classified in liquidation upon notice of a borrower bankruptcy and may require SBA approval before supporting a plan that compromises 7(a) loan principal.

How Our Firm Helps
We help lenders respond promptly to borrower and guarantor bankruptcies. Our services include proofs of claim, stay-relief motions, plan and disclosure-statement review, objections, reaffirmation issues, collateral protection, settlement analysis, and SBA coordination. For cases outside our licensed jurisdictions, we coordinate with qualified local co-counsel.