1) Pay Less Today, or A Lot More Tomorrow
I know this advice is going to fall on deaf ears, because I see the same scenario every single day. I get a call from someone who thought the bank/SBA had given up on trying to collect their defaulted SBA loan, only to get a call from one of the collection companies that the US Treasury hires to “beat the bushes” in an effort to recover some cash.
Here’s the problem with the collection companies: they are really really really hard to settle with. They want a lot of cash, and they want it now.
So, how can I avoid being backed into a corner by a collection company, you ask? It’s simple: BE PROACTIVE. Don’t wait for the bank to come to you. Instead, you should go to them. This means that the day you close your business, you need to be in touch with the bank and get the process moving. If you don’t get a return phone call in a few days, try again. If you are intimidated by the bank, then hire a guy like me.
Overall, the reality is this: In the vast majority of cases, a more reasonable settlement can be worked out through the bank/SBA than through the collection companies.
2) Life Isn’t Fair, and Neither is The SBA
Don’t get me wrong, I actually find the SBA to be a very reasonable group of people to deal with. That said, when their form letter goes out that says you have 60 days to get back to them, I’d strongly advise responding as soon as you can. On more than one occasion, I have had clients come to be on day 59, only to be disappointed that their loan was turned over to the Treasury before they had a chance to make a settlement offer. And believe me, complaining to the Treasury that you only got 59 days instead of 60 will get you nowhere. Once its goes to the Treasury (and then to a collection agency), you MUST deal with those entities. I’ve even seen the file be turned over to the Treasury a week or two before they were supposed to.
3) Fees, Fees, and More Fees
When you signed your loan documents, there was a section where you agreed to pay the bank/SBA for the costs they incur in trying to collect the debt from you. In the case of the Treasury and its collection companies, that often can add an additional 20% to your debt total. Attempting to dispute these fees will be like trying to explain physics to my golden retriever…no matter what you say or how you say it, you will not have any success.
So please folks, in order to give yourself the best chance at settling, take action today!