SBA Loan: Panic to Solution
In 2008, my wife and I personally guaranteed an SBA loan for $950k to purchase a thriving business. While I believed that the economy was near the bottom and couldn’t get much worse, I was proved terribly wrong. Despite experience and previous success in the industry coupled with a conservative business plan, the business was unable to sustain itself and the SBA payments.
Disappointment turned to anxiety and anxiety to fear. The bank held a second mortgage on my home. Personal guarantees had my home, bank accounts, automobiles and anything else of value in jeopardy. Business concerns quickly bled over to personal and family concerns. Bankruptcy looked like the only available option under the circumstances. And bankruptcy meant not only losing everything, but also giving up my home because of the second mortgage. Anger, embarrassment, heartbreak and confusion are just a few of the many emotions that washed over me many times a day.
A friend suggested that we try to negotiate a reduction in what we owed. It sounded great but negotiate with who? The bank? The SBA? Both? The company didn’t really have a “banker” and we didn’t know anyone at the SBA. A little searching lead us to believe that negotiating a reduction might be possible but consistent with anything involving the federal government, it seemed incredibly complicated. There was simply too much we didn’t know and didn’t have experience with.
We made a list of questions.
- What is the process?
- Where do I start?
- Do I make my best offer or start low?
- What will the SBA expect?
- How long will it take?
- What is the banks role in presenting an offer?
- Am I required to continue operating the business while the offer is made?
- What happens if we aren’t current with our payments?
- What if I get sued?
These and many other questions made us quickly understand that we needed help. Professional help! My wife had her own list involving moving our children from their schools, neighborhoods, family and friends. Far too much was at stake for my family to take a DIY approach as I had most of my professional life. I was surprised to find that there were not a lot of experts in the matter. The few we found on-line were far-away “consultants” that didn’t inspire confidence.
By dumb luck or divine providence, we were recommended to Kevin McCarthy. A law firm that focuses on workout, both business and personal. They understood not just the process of negotiating with the bank and SBA but understood our anxiety that went along with it. The firm knew exactly what to do and when to do it. Working with attorneys who knew the law and our rights was the only way we were going to go. Our blood pressure dropped enormously after we engaged Kevin McCarthy. We knew we were in good hands and felt for the first time in a long time that we could survive the business failure.
Kevin McCarthy and his team negotiated and handled everything! We ended up keeping our home, our cars, our possessions and avoiding bankruptcy. Best of all, the bank and SBA eventually accepted $30,000 cash in full settlement (more than $700,000 less than I owed), released me from any further responsibility, and released the mortgage on my home.
Bad things sometimes happen to good people, especially in these difficult economic times. I recommend McCarthy Law to anyone needing help with an SBA loan.