The “million dollar” question for anyone who wishes to settle their personal guarantee pledged in connection with an SBA loan is a simple one: HOW MUCH CAN I SETTLE FOR?
While its a legit (and obvious) question to ask, I will explain why it’s a hard question for answer with pin point accuracy (I’ll ignore the fact that I’m not in the habit of working for free – already covered in another blog post).
Prospective clients often always ask me how much they can settle for before I know anything at all about their situation, as if the SBA has a predetermined percentage that they are willing to settle for. For the record, there isn’t. Unlike our friends at the US Treasury (who actually do arbitrarily pick a percentage) the SBA actually evaluates the financial condition of the borrower. Most settlements that reach a mutually agreeable resolution generally settle somewhere in the realm of 15% to 40% of the balance owed. With that said, if you are reading this right now, and wondering how much you can settle for, it will NOT be helpful or accurate to start multiplying your balance times these percentages because 1) it’s a large range; 2) people’s personal financial situations vary so greatly, the only accurate way to estimate a settlement offer is to dig deep into the details of their PFS, and 3) there is no preset amount that a bank or the SBA will settle for. This means some banks will negotiate harder than others resulting in a wide array of settlement amounts.
So what my point? I always fight for my clients to extent that I know there is room for negotiation, but it’s impossible for me to pinpoint with any of precision where a settlement will ultimately end up during an introductory consultation.