13 CFR § 140.2 - What is a debt and how can the SBA collect it through offset? (2024)

FAQs

13 CFR § 140.2 - What is a debt and how can the SBA collect it through offset? ›

(b) SBA may collect past-due debts through offset by using any of three procedures: administrative offset, salary offset, or IRS tax refund offset. A past-due debt is one which has been reduced to judgment, has been accelerated, or has been due for at least 90 days.

If you suffered through an SBA loan default you may be subject to an administrative offset. The administrative offset consists of primarily a garnishment of your federal benefits, the most common of which is Social Security. It is another weapon that the government uses to make your SBA loan problems worse.

Reach out to your lender

Before you reach the point of default, talk to your SBA lender. If you're having trouble making payments on time, or at all, be honest with your lender about the situation. It may be willing to work with you on a resolution, such as: Lengthening your loan term to lower monthly payments.

A debt is legally enforceable if there is any forum, including a State or Federal Court or administrative agency, in which SBA's claim would not be barred on the date of offset. Non-judgment debts are enforceable for ten years; judgment debts are enforceable beyond ten years.

SBA may request that IRS reduce a debtor's tax refund by the amount of the debt, as authorized by 31 U.S.C. 3720A. Where available, administrative and salary offsets must be used before collection is attempted through income tax offset.

With a standard home loan, you pay interest on the total amount owing. But with an offset, interest is charged on the difference between your home loan balance minus the amount in your linked offset account. This means you can pay less interest with an offset account.

A plan loan offset occurs when a participant's account balance (or accrued benefit) is reduced to pay a defaulted loan. This may occur when the terms governing a plan loan require that the loan be repaid immediately or treated as in default as a result of certain events, such as an employee's termination.

Yes, you can use a small business loan to consolidate previous business debts. The lender may ask you for the purpose of the loan funds during the application, so you'll need to tell the lender that the purpose is to pay off debts.

You may also submit an OIC to the SBA and your lender to find an alternative way to repay your loan if you have gone out of business. You should also be prepared for the lender to try and collect the collateral you promised to secure the loan if you can't repay it.

Business owners defaulting on their SBA loan can apply for loan forgiveness, but that does not guarantee the SBA will approve the request. It is more commonly referred to as an "offer in compromise". The SBA evaluates your case and discusses the matter with the lender.

What happens if an SBA loan goes into collections? ›

The Lender Seizes Assets Pledged as Collateral

Most SBA loans require some form of collateral, which can be liquid assets like the cash in your business bank account or tangible assets like business equipment or real estate. The lender will begin to recoup its losses by seizing your assets.

Many clients ask us, “Can bank accounts be garnished in an SBA loan default?” Simply put, yes they can. So here is what you need to know if you are at risk of being garnished in an SBA loan default.

SBA may order your employer to pay SBA a portion of your disposable pay to satisfy delinquent non-tax debt you owe to the United States. This process is called “administrative wage garnishment” and is authorized by 31 U.S.C. 3720D.

Effective March 13, 2024, all borrowers, regardless of loan size, can use SBA's direct forgiveness portal. Applying for forgiveness using the portal can take as little as 15 minutes. The questions you will be asked in the portal correspond to those asked on SBA Form 3508 , SBA Form 3508EZ , or SBA form 3508S.

As long as you meet the IRS requirements, you'll be able to deduct 100% of your interest payments on your SBA 7(a) loan: You must be the legally liable person for the loan. You must have agreed with the lender to repay the loan. The applicant must have a “true debtor-creditor relationship” with their lender.

SBA loans are small-business loans offered by banks and online lenders and partly guaranteed by the government. Check SBA loan rates for 2024SBA loans offer some of the lowest rates on the market, but rates can change based on the Federal Reserve's actions.

Does the SBA forgive loans? The SBA generally doesn't offer 100 percent forgiveness on 7(a) and 504 loans, no matter how dire your finances are. However, for companies that have had to cease operations, the SBA will consider settlements that have been agreed to between a borrower and their loan issuer.

It's really very simple. An offset account is a transaction or everyday banking account that is linked to your home loan. Every dollar you have in that account 'offsets' the balance of your loan – reducing the amount of interest you pay every month.

The goal of offsetting is to reduce an investor's net position in an investment to zero so that no further gains or losses are experienced from that position. In business, an offset refers to the generation of gains in one business unit that makes up for losses in another unit.

If you can no longer repay your SBA loan, you can end up defaulting on your debt. Once that happens, you can face a long series of consequences. First, the lender will attempt to collect the debt. If it's unsuccessful, the lender may seize your collateral to recover its losses.