Monthly payments are coming due; interest rates are higher than they were a few years ago and many small business owners are discovering that “affordable” SBA financing can feel far less manageable in today’s environment. For a growing number of SBA borrowers, repayment stress is not just a passing worry — it is becoming a persistent pressure that affects cash flow decisions, hiring plans and day-to-day operations.
In this post, we will explore why repayment stress is rising for SBA borrowers, what is driving the shift and options for business owners that are struggling to make ends meet.
Why is repayment stress on the rise?
Many small business owners took Small Business Administration (SBA) loans to stabilize operations during volatile conditions. A prime example being the pandemic. Repayment now collides with higher costs, elevated interest rates and delayed receivables. In legal terms, repayment distress creates immediate issues for borrowers potentially including defaults for missed payments. This can compound the issue, adding frustration to an already difficult situation.
Borrowers who find themselves in this situation are not alone. According to a recent report in The New York Times, the SBA has referred over $75 billion in delinquent loans to the Treasury Department for collection. Business owners should note that they are in the crosshairs of experienced federal collection officers. The Treasury Department’s Bureau of Fiscal Services is aggressive about these collection efforts. They may refer delinquent loans to credit reporting services and garnish funds directly from tax refunds and Social Security payments. Those who used assets to personally guarantee the loan can find themselves facing liens on their homes and businesses.
What options are available for business owners struggling to meet repayment demands?
There is the possibility that lawmakers will step in and offer additional relief. Legal counsel with experience in this area has voiced concern and expect the Treasury or Congress to step in. The piece in The New York Times quoted Benjamin Goldburd, an attorney with experience in tax and corporate matters who has seen a “deluge” of small business owners in this predicament, stated such intervention seems likely as the government does not want to pursue hundreds of thousands of lawsuits against small business owners.
In the meantime, small business owners are wise to seek legal counsel with experience in this niche area of law to review the particulars of their case and help determine the best course of action. Options could include payment assistance, forgiveness, discharge and offers in compromise.