Liquidating sba loans
Please refer to the SBA website at gov for more information and to obtain the appropriate mailing addresses.Requesting a transfer means the loan will be moved from the Commercial Loan Service Center to the National Guaranty Purchase Center to await further information from the Lender.
The SBA provides loans to businesses by backing lender-issued loans and guaranteeing payment of the loan in the event of an SBA loan default.
Guaranteeing the loan means that, should the business default on the loan, the SBA will guaranty the bank’s ability to recover any outstanding loan funds by “purchasing the guaranty.” In other words, the SBA will pay to the bank the remainder due on the loan, and in essence, acts almost like an insurance company.
The entire process is referred to as SBA loan liquidation.
This type of loan may only be used for major, fixed assets, such as buildings or land.
The complex procedures for liquidating a 7(a) or 504 loan are very similar, but there are differences that Borrowers, Obligors and Personal Guarantors should know – especially, if they are confronting payment problems and imminent SBA loan default, and want to settle SBA debt. The first step in liquidating any loan is to confirm that it qualifies for liquidation under applicable SBA Standard Operating Procedures (SOPs).
There are eight general categories for classifying an SBA loan in liquidation status: Once it has been determined that the loan qualifies for liquidation, notice must be sent to the appropriate Commercial Loan Service Center (CLSC) requesting transfer of the loan to liquidation status.Loans originating in the eastern or mid-eastern United States are referred to the service center in Little Rock, Arkansas; loans made in the western or mid-western United States are handled by the service center in Fresno, California.By engaging in this process, the lender shifts the risk of loss of the SBA loan default to the SBA while still retaining control over loan administration and servicing during the time the loan is still active.There are two (2) main types of SBA loans: 7(a) and 504.A 7(a) loan is a lender-issued loan that can be used by a small business for a variety of different purposes, such as working capital.A 504 loan typically involves a senior loan issued by a lender and a junior loan issued by a Certified Development Company (“CDC”) along with mandatory contribution by the Borrower.