How Does SBA Become Part of the Default?
In case your bank exhausts all ways to recover debt, and still has not acquired the whole amount from you, they can approach the Small Business Administration against the SBA guaranteed loans dictated by the administration. After that, the SBA would make the payment to the bank and take control of the collections process. The SBA will subsequently reach out to you requesting that you complete the entire payment or give an “offer in compromise” inside 60 days. If this letter is left unanswered, the debt will be forwarded to the U.S. Treasury Department for collections.
Offer in Compromise
The offer in compromise (OIC) given by the SBA is a proposal to settle the payment of the reduced amount from the debt. You have to present a proposal to finish off the debt, and give evidence including personal and business taxes, as well as a list of your debts and assets to back your proposal. It has to be ensured that the proposal is reasonable and fair, and you should demonstrate that you will be able to repay the proposed amount. Generally, the SBA prefers a fixed sum payment instead of a payment plan.
The offer in compromise should be submitted to the lender before they send it to the SBA for approval.