Are You Personally Liable For An SBA Loan?
Are You Personally Liable For An SBA Loan In North Carolina?
Yes, you are personally liable for your SBA loan. However, if you wish to verify it, you can have our firm review your SBA loan docs for you. More simply, you will notice that the signature line for the SBA loan was signed once by the company, and another time as the company owner, “Individually”. This is the individual guarantee.
An SBA loan is a loan guaranteed by the Small Business Administration and issued in partnership with another bank. While the terms of an SBA loan are favorable, you will be personally liable for an SBA loan. This means that if the business fails to repay the loan, the lender can pursue your personal assets.
The Extent Of Your Guarantee
Each personal guarantee is different. You may have a general personal guarantee or a limited personal guarantee. With an unlimited personal guarantee, in the event of a default, the lender can pursue you personally to the extent of the unpaid loan balance plus fees. In a limited personal guarantee, there will be a limit to your exposure if the company defaults on loan repayment. Your loan language would need to be reviewed to determine if your guarantee is limited or unlimited.
SBA Loans Secured By Real Estate
It is not uncommon for an SBA loan to be secured by your real property (home) or other real estates you or the business may own. In this event, the lender has the additional recourse of pursuing the equity in the property if the loan is not paid in a timely manner.
Negotiating SBA Debt
If you are about to default or have defaulted on an SBA loan, you can negotiate the debt and possibly reach a debt settlement agreement with the SBA. Unlike other debt negotiations, reaching an agreement with the SBA will require the disclosure of much more financial information to the lender. The reason for this is the lender is attempting to assess your ability to pay the loan. Further, they want to know whether you will be able to keep your agreement under the re-negotiated terms.
As a bankruptcy law firm, our firm has had success negotiating SBA loans for debtors on the verge of filing bankruptcy. When faced with getting paid nothing in a bankruptcy, or negotiating a settlement with a borrower in financial trouble, the SBA often offers reasonable terms which the borrower can accept. Our firm negotiates those terms on behalf of the borrower.
Negotiating debt does affect your credit score; however, in the overall picture, the temporary drop in credit score is almost always outweighed by the debt relief the borrower experiences by alleviating the monthly payment burden.
SBA In Bankruptcy
SBA loans are addressed in Chapter 7 personal bankruptcy. Depending upon whether the business is still operating, and whether the guarantee is secured by property, the loan may receive differing treatment in bankruptcy. If you file a Chapter 13 your SBA loan will be addressed as well.
Speak With An Attorney
If you are a NC resident and wondering if you are personally liable for an SBA loan, call us. Consultations are free and you deserve to understand your options. You can reach us at 704.749.7747 or click HERE to request a consultation. We know you have choices. We hope you choose Layton Law.