What is an SBA Loan Negotiation?
An SBA loan is a business loan that can help you gain funding for your small business, usually with better rates. How it works is that it’s partially guaranteed by the Small Business Administration (SBA), hence its name. It gets issued by lenders, such as banks.
In the rest of this article, we’ll explore important aspects about SBA loans, such as their key terms, how you can negotiate if you require assistance with paying back the loan, and how a lawyer can help you achieve your goals.
What are Some Key Terms of an SBA Loan?
There are some essential terms you’ll usually find in SBA loans. Understanding these can help you with negotiating the loan.
- Loan proposal. You’ll have to apply for a loan and specify how much money you need and how it will be used by your business. You’ll also state how the loan will be repaid and what collateral will be considered.
- SBA Small Loans. These are loans that offer up to $500,000 in funding and can help businesses cover costs of various requirements.
- SBA Express Loan. This type of loan provides up to $500,000 but it’s flexible because you can use it as credit or a term loan.
- SBA Standard Loan. This provides up to $5,000,000 and it can be used for various business purposes, such as buying equipment or financing debt.
- SBA 504 Loan. It provides long-term and fixed rate financing for real estate purchases and other purposes.
- Repayment. This outlines the terms to pay back the loan. It can include monthly payments or a lump sum.
- Interest rate. It can be fixed or variable, but the lender will select it based on the SBA’s rate maximum guidelines.
How Can You Negotiate an SBA Loan?
It’s possible to negotiate a payment plan to pay off your SBA loan if you’re in default. An example of a program offered by the SBA to help you is an Offer in Compromise (OIC). This enables you to settle your debt for an amount that’s lower than the total amount so that some of it is paid back even if you can’t afford to pay all of it.
But, to be approved for it, you’ll need to provide documents to prove that you’re struggling financially. Here are the steps to follow.
- Think about a reasonable offer for paying off the debt that you can realistically afford. Take your assets and income into account when calculating this amount.
- You’ll have to submit an SBA Offer in Compromise application form with a written explanation of your financial circumstances so that the SBA can review your application. They will either accept, counter, or reject your offer. If your application is rejected, you’ll have to consider alternatives to settling the debt, such as filing for bankruptcy.
- Ensure you have all the required financial documents in your application. These include:
- A personal financial statement (dated within the last 90 days)
- A business financial statement, provided your business is still in operation
- Personal and business tax returns (from the last two years)
- Bank statements (for the last six months).
Can You Negotiate the SBA’s Offer?
After submitting your application for payment relief, the SBA will get in touch with you. Besides accepting or denying your request, they might make a counter offer. This involves the SBA suggesting a different amount for you to pay.
Before you make another offer or accept it, take some time to consider the SBA’s offer. Check the settlement amount they have proposed and any payment timing or structure changes to the loan. There might also be additional conditions, such as guarantees or deadlines.
If you want to make a counter offer, you must show the SBA why your proposed offer makes more sense. You can do this by:
- Providing financial explanations. This can include your current tax return or updated financial statements.
- Including a revised offer. This should be submitted along with financial proof so that your offer has a strong foundation. Your offer could include slightly raising the amount in your original offer but keeping it lower than the SBA’s counter offer so it’s more affordable.
- Considering paying a lump sum. It’s sometimes the case that the SBA will approve your application if you offer to pay a lump sum instead of paying via a payment plan over time. Although the amount they receive might be lower than the total amount owed, it will avoid a situation in future where you can’t make monthly payments.
If you’re unsure of why the SBA is making a specific offer, you can request clarification for this. This will ensure that you get their response in writing and you’ll be in a position to tailor your counter offer based on their reasoning.
Do You Need a Lawyer for SBA Loan Negotiation?
Although you can negotiate with the SBA yourself, it’s advisable to seek legal assistance from a qualified lawyer. This is because you’ll have to provide accurate documentation and you might not have the experience of dealing with the SBA.
A lawyer can help you in various ways, such as by:
- Interpreting the offers.
- Being skilled at making valid counter offers.
- Understanding SBA processes, such as how they assess offers.
- Assisting you with your OIC application to prevent mistakes that could result in an offer rejection.
- Helping you avoid accepting offers too quickly that don’t match your financial situation.
- Ensuring you make offers in a timely way.
- Drafting responses and offers so that they’re clear and professional.
- Helping you in cases of litigation, such as if the lender is trying to repossess assets by filing a lawsuit. Your lawyer will support your case and represent you to stop the action.
Where Can You Find a Lawyer for an SBA Loan Negotiation?
If you’ve decided you want professional help from a qualified lawyer to navigate the process of negotiating an SBA loan, you should hire a lawyer from ContractsCounsel. All lawyers on this online legal marketplace are vetted and have the experience of having assisted clients with SBA loan negotiations.
You can find the best lawyer to meet your legal requirements by reviewing them on the platform. Check their credentials, years of experience, client ratings, and more so you can feel confident about getting the legal advice you need.
