Expert: Christine Janklow - 9/26/2008

Question
We have an SBA loan for our excavation company.  We have some serious debt problems.  We have been unable to collect on several sub contractors and jobs.  The bank representative at Utah Bank has called and threatened to start taking equipment from our job sites.  We originally signed our SBA with limited equipment.  He claims he can take any of our equipment to satisfy the loan.  We did not agree to that.  We have been paying this loan for over 10 years, we are one payment behind, and will be two payments behind next week.  What options do we have?  Is he right, that he can reposses any and/or all of our eqiupment.  He knows all about our personal debt and threatens that as well.  We are an S corp, been in business for over 10 years and we are just struggling in this market like everyone else.

Answer
Sherrie: Thank you for your inquiry. I have received many like this and have invested significant time through a vast library of resources to turn up very little on the "rules" of how government backed loans can be enforced if defaulted. Without having benefit of knowing the conditions of your loan, it is very difficult to say if what you described can be effected. As you are likely aware, the lender (bank) who brokered the loan for you is guaranteed to get some of the money returned to them by the SBA. The outstanding portion will be your responsibility and that may be for the entire balance of the loan. I have heard from businesses that have owed for years, and no one has shown up to collect and then those who have lost their homes to the SBA. It is never prudent to simply ignore threats from creditors, so if you really believe they might want to enforce collections by obtaining some collateral or assets, they may intend to do so. Those pieces of equipment are not going to fetch much in this economy if at all. The cost of them hauling that off, storing it for auction and recovering? Seems futile. Having said that, you mentioned another aspect of your financial hardship that you might be able to find relief on which could free up cash to pay this loan, that is your personal and or other business debts. My company specializes in debt settlement for businesses (and their owners) and if you have credit card or other unsecured debts these can be negotiated and reduced saving you money monthly and in the long term. I would be pleased to personally conduct a confidential no cost or obligation consultation to explore if this option is right for you and your business. (Regrettably the SBA loan is not a debt that can be negotiated) If you are interested, feel free to contact me by e-mail chris@settlesource.net.
I recommend you look for every option to free up cash and your need to use it for debt servicing, even if it means you opt to sell some of that equipment to get caught up. Lastly, I recommend that you hire a good collection agency or attorney who deals with collections to try and get some of that lost revenue back in your business. If you found this answer helpful, please take a moment to reply with a positive rating and/or comment, so others may benefit as well.

Respectfully,
Christine Janklow