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Business Loan in Default? Your Best Bet May Be an SBA Loan Workout

Despite some hints at an improving economy, it’s still tough out there for many small business owners, and many owners are finding themselves in a loan default situation. In addition to being at risk for losing their businesses, these owners could potentially lose their homes and other personal assets. While there may seem to be no way out, there may be a light at the end of the tunnel: a Small Business Administration (SBA) loan workout.

The SBA has an Offer in Settlement procedure, which means you may be able to renegotiate your loan with your bank, based on the value of your business assets, including real estate and your machinery and equipment. There are many banks out there that are now working with business owners to keep them on track rather than forcing them to shut their doors. With numerous businesses in or facing loan default, it’s in the best interest of the banks to recoup what they can.

Here are a few things to keep in mind if you are facing default:

1. Ask your bank if a workout might be possible – It beats closing down and facing liquidation of the business you have worked so hard to build.
2. Be prepared – Do your homework and find someone you trust who has experience with workouts, SBA policy, and the FDIC rules that banks must abide by.
3. Know what it’s worth – In a workout situation, the bank will definitely get an appraisal of your business and assets to determine if the business is worth more to them dead or alive. It may be in your interest to get your own third-party appraisal so that you have something to negotiate with.

Check the SBA site for more information.

Present Value LLC is a worldwide international appraisal and advisory company that provides a range of professional services such as Certified Machinery and Equipment Appraisals, Inventory Appraisals, Asset Verification Services, Business Valuations, and Real Estate Appraisals. Contact us today!

By: Present Value

Additional Reading

Lenders Turn to Present Value LLC for Pre-Loan Due Diligence

Common Definitions of Value for Machinery and Technical Assets

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