Liquidating sba loans

Special attention should be paid to the fact that a lender’s right to accelerate amounts due under the note are different than a lender’s right to request a guaranty purchase from the SBA.Generally, a borrower must be in default on a payment for more than sixty (60) calendar days before a lender can request a guaranty repurchase.Prior to initiating liquidation or collection, a Liquidation Plan should be prepared.A comprehensive liquidation plan is a great roadmap for lenders to pinpoint the specific steps it should take to maximize recovery.Generally, a loan should be accelerated when it is clear to a prudent lender that, after a good faith effort to assist the borrower to bring the loan current, the default cannot be cured.In making this determination, lenders should rely on their own policies and procedures for similarly-sized, non-SBA guaranteed commercial loans.

Borrowers default and, as a result, lenders must liquidate and commence collection in a prompt, cost-effective, and commercially reasonable manner.An accurate assessment of the recoverable value of the collateral at an early stage of liquidation and collection is an invaluable tool that can significantly influence the recovery process, allowing the lender to quickly eliminate or solidify potential liquidation and collection options.Second, lenders can assess whether out-of-court liquidation and collection avenues, such as workouts or repossession via self-help, are feasible.In these cases it may be advisable, based on the value of the collateral, the terms of the underlying documents, and the lender’s internal policies, to accelerate amounts due under the note based on a non-payment based default.Once a loan is accelerated, it is in “liquidation” status, and the SBA will need to be notified.For non-payment defaults (such as bankruptcy filing, business shutdown, or foreclosure by a prior lienholder), the site visit must occur within fifteen (15) calendar days of the occurrence of the adverse event.Site visits should occur earlier if there is concern that the collateral could be removed, lost, or dissipated.At this time, if the SBA guaranteed portion of the loan was sold in the secondary market, it must be repurchased.After acceleration, a demand letter should be sent to all obligors under the loan, unless prohibited by applicable law.Whether or not a loan is exempt from a post-default site visit or the site visit was conducted, all lenders must prepare a post-default Site Visit Report, explaining why the site visit was not necessary or detailing the lender’s findings from the inspection, including an inventory of the remaining collateral and an assessment of its condition and value.Often, lenders will have lending relationships with borrowers, other than the SBA loan.

Leave a Reply

Your email address will not be published. Required fields are marked *

One thought on “liquidating sba loans”