One of the most common questions I get about SBA loan default is “How much should I offer to settle my SBA debt?” And I always give the same answer: It Depends.
So what does it depend on? On you, of course.
When evaluating a settlement offer, the SBA asks for a number of financial documents. The intention behind asking for all the info, aside from making you go blind on paperwork, is that the SBA wants to ensure that you truly cannot afford to repay the debt in full. What types of things will indicate that you perhaps have the ability to repay the debt in full? A high paying job, a home with lots of equity, liquid assets, or assets that could be sold to raise cash are all “red flags” that could result in a rejection of a settlement offer.
Here are some “Do’s” and “Don’ts”:
- DO fully and accurately disclose all income and assets. Getting caught lying could result in further litigation.
- DO make sure that you fully complete all forms, and provide all documentation requested.
- DO respond to calls and letters in a timely fashion.
- DON’T believe people that promise that you can settle your debt and keep your business. The SBA rarely allows such an arrangement. Such a feat can usually only be accomplished through deceptive practices.
- DON’T commit to a settlement that you cannot honor. If you fail to come through on a commitment to pay, the SBA could seek judgments, wage garnishment, or foreclosure.