What Happens If You Don’T Pay Back Ppp Loan

If you signed a personal guarantee for your SBA loan, the SBA and the federal government will expect you to repay the loan.

What Happens If I Don’t Pay Back An SBA Loan?

Before we can respond to what happens if I don’t repay an SBA loan, you must comprehend your responsibility. Businesses use SBA 7a loans for working capital. The lending institution is made up of a third party lender like Wells Fargo, and the SBA guarantees a portion of the loan in case of default. The borrower is typically a separate legal entity you own and run for business purposes, such as a corporation or limited liability company (LLC).

However, as a 20% or greater owner, the lender and the SBA demand that you sign a personal guarantee. Form 148, the personal guarantee that is frequently required for SBA loans, is available for download. The lender or SBA may request that you put up personal collateral, such as your home or a rental property, in certain circumstances. Additionally, your company pledges as security all of its assets, both tangible and intangible.

Default on the SBA Loan

What happens if I cannot repay an SBA loan? can now be addressed. When your business defaults on an SBA loan, several consequences follow. The lender will first ask the company for payment of the remaining loan balance. However, the lender will foreclose on the business’s pledged collateral if the borrower is unable to make the full payment. Your business assets may not have much value. In that case, the lender will abandon the collateral.

Now that the personal guarantee you signed is in effect, the lender will ask you to pay the amount owed. In addition, the lender will try to seize any personal collateral you pledged. In order to collect the debt, the lender may decide that it needs to sue you.

Referral of the Debt to the SBA

In some cases, particularly if you haven’t pledged any personal assets, the lender will decide it’s not worth the time or money to sue you as a personal guarantor. After that, the lender will refer the debt for collection to the SBA. The SBA will notify you via notice that you are responsible for the debt. You will learn from the notice that you have 60 days to pay or come up with another plan. Additionally, the notice will let you know that you have the right to review any documents associated with your debt if you don’t think you should be responsible for it.

Referral of the Debt to the Department of Treasury

If you fail to respond to the 60 day notice sent by the SBA, the SBA will refer your debt to the Treasury for collection. The Treasury has many options to collect the debt. For instance, the Treasury could refer the debt to the Department of Justice to file a lawsuit against you. In addition to filing suit, the Treasury can garnish your wages, take your tax refund, take some or all of any federal payments due you (i.e., Social Security, disability, military pension, etc.).

What Solutions Are Available to Me?

You do have options if your business defaulted on an SBA loan. If you do not have enough money to pay the debt in full, you can offer a portion as a settlement through the process known as an “offer in compromise.” Several legal and monetary factors determine whether and how much of an offer in compromise will be accepted.

However, to significantly increase the likelihood of a successful offer in compromise, you need knowledgeable legal counsel. Your offer in compromise will be rejected if the required forms and documentation are not submitted. Additionally, if you attempt to undercut the SBA in your offer, you will encounter aggressive collection strategies.

For a successful offer in compromise, the lawyers at Protect Law Group give you the knowledge and aggressive representation you need. Contact our offices today for a initial consultation.

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

Without our clients declaring bankruptcy or having their homes foreclosed upon, millions of dollars in SBA debts were settled through offers in compromise and negotiated repayment agreements.

AWG Hearings, Treasury Offset Program Resolution, Cross-Servicing Disputes, Private Collection Agency Representation, Compromise Offers, and Negotiated Repayment Agreements have all been used to defend against millions of dollars in Treasury Debts.

Our attorneys are permitted to represent federal debtors across the country before the SBA, the SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service under the Agency Practice Act.

What Happens If You DonT Pay Back Ppp Loan


Clients personally guaranteed SBA 504 loan balance of $750,000. Additionally, clients pledged their homes and the company’s inventory and equipment. Clients had consented to a voluntary home sale to reduce the balance. We intervened and rejected the proposed home sale. Instead, we negotiated the release of the mortgage lien and a reasonable term repayment agreement.

What Happens If You DonT Pay Back Ppp Loan


Clients borrowed and personally guaranteed an SBA 7a loan. Clients were sued in federal district court for contract breach after defaulting on the SBA loan. To reinstate and secure the delinquent SBA loan, the SBA lender required the client to put up a number of personal real estate properties as collateral. Consequently, our services were sought to intervene and vigorously defend the lawsuit. Following several months of court proceedings, our lawyers negotiated the reinstatement of the SBA loan and a well-structured workout that excluded liens against the Clients’ individual real estate holdings.

What Happens If You DonT Pay Back Ppp Loan


Client personally guaranteed SBA 7(a) loan balance of over $150,000. Business failed and eventually shut down. SBA then pursued client for the balance. We intervened and were able to submit an SBA OIC for $30,000 that was accepted.


What happens if you can’t pay back PPP?

For those unable to repay PPP loans that have not been forgiven, bankruptcy may provide a solution. In some cases, it may also help with EIDL loans. Although the criteria are less strict than they were when the program was first established, the borrower should still investigate the possibility of forgiveness.

How can I avoid paying back a PPP loan?

Use the following tips on how to make sure your PPP loan is forgiven to get started:
  1. Use it for eligible expenses.
  2. Keep your employee headcount up*
  3. Don’t reduce an employee’s wages by more than 25%*
  4. Document everything.
  5. Talk with your lender.
  6. Apply for loan forgiveness.

What are the terms of PPP loan if not forgiven?

If you don’t request forgiveness, you’ll be required to pay back the loan at a low fixed interest rate of 1%. If you received your PPP loan before June 5, 2020, you have 2 years to repay it; if you received it after, you have 5 years to do so.

What happens if I can’t pay back my SBA loan?

Your Loan Will Default If you stop making loan payments, your loan will become delinquent. The terms of your SBA loan contract will determine how long you have to make payments before defaulting. Although generally speaking, you’ll have 90 to 120 days to start making payments