SBA has helped many business owners grow their business through providing funding when other lenders didn't. However, if you default on one of these types of SBA loans, you will be subject to administrative wage garnishment.
Administrative Wage Garnishment
Here are the types of SBA funding loans available to you:
These loans are the most common and known type of SBA funding. SBA 7(a) loans can be used to start a business, acquire an existing business, buying equipment and inventory, refinance existing debt, among others.
These loans offer up to $5 million in funding with a 10 to 25-year repayment. The interest rates range from 5.75% to 8.25%.
An up to 10-year repayment option applies for a working capital loan. For commercial real estate applies up to 20-year repayment option. SBA 7(a) loans may require a 10% to 20% down payment, and collateral.
SBA express loans follow the same guidelines that the SBA 7(a). But, the loan amounts for these are from $5,000 to $350,000. The interest rates on these loans range from 4.5% to 6.5% plus prime rate.
The loan terms for the SBA express loans are up to 7 years for a line of credit, up to 25 years for real estate, and from 5 to 10 years for other purposes. These loans can be used for additional working capital, cash flow, buy supplies and inventory, among others.
These loans help small businesses in disadvantaged markets to get access to funding. The amounts of SBA community advantage loans are up to $250,000 provided through community-based lenders. The interest rates on these loans are 6% plus prime rate.
The repayment terms on these loans range from up to 7 to 25 years. For working capital and startup expenses, range from up to 7 to 10 years. If the loan is for real estate, the repayment term will be for up to 25 years.
These loans are provided to startups and small businesses that don't have enough credit record to get approved for a traditional loan. These funds can be used for purchasing real estate, working capital or expanding your existing business.
SBA microloans are offered help small businesses, startups, and non-profit child-care centers with their working capital needs. These loans provide up to $50,000 in funding. These loans can be used as working capital, purchase inventory and supplies, startup capital, among others.
The interest rates on these loans range from 6.5% to 13%. The repayment term is a maximum of up to 6 years. These loans can't be used to purchase real estate or pay existing debts.
These loans are offered by the Certified Development Company (CDC) and SBA 504 program. CDC/SBA 504 loans are provided to small businesses for the construction, purchase or renovation of commercial real estate properties, and other fixed assets like equipment.
The loan amounts are up to $5.5 million. Depending on the purpose of the loan, the loan terms may be 10 or 20 years. The interest rates range from 4% to 8%.
The SBA CAPLine provides lines of credit to help small businesses their working capital needs. These may be used to cover the business's cash flow requirements, fulfilling purchase orders, renovation of commercial properties, among others.
The amounts of these lines of credit are up to $5 million, and up to $200,000 for small business asset based lines. The interest rates range from 5.75% to 8.25%. The repayment terms are for up to 5 years. You may have to provide collateral such as inventory, invoices, purchase orders, contracts, among others.
These loans are offered to small business exporters. These may help them enter new foreign markets, international transactions, and expand their exporting operations.
The amounts of these loans are from up to $500,000 and $5 million. Repayment terms on these loans are up to 3, 7, and 25 years. The 3 types of SBA export loans are SBA Export Express loans, SBA Export Working Capital loans, and SBA International Trade loans.
SBA disaster loans are offered businesses that have suffered damages or been destroyed by a declared disaster. These loans can be used as working capital, operating expenses, and to replace or repair assets like inventory, equipment, personal property, and real estate.
These loans can provide up to $2 million in funding. The interests range from 4% to 8%. Repayment terms are up to 30 years. The 3 types of SBA disaster loans are SBA Business Physical Disaster loans, SBA Economic Injury Disaster loans, and SBA Military Reservists Economic Injury loans.
If you have obtained any one of these SBA loans and have defaulted, the Department of Treasury can subject you to an administrative wage garnishment without obtaining a state court judgment first. This means the Department of Treasury can take up to 15% of each paycheck to pay down the debt.
The Debt Collection Improvement Act (DCIA) specifically states that the ability to garnish your wages through administrative wage garnishment applies notwithstanding any state law. The Supremacy Clause of the United States Constitution (Article VI, Clause 2) establishes that the Constitution, federal laws made pursuant to it, and treaties made under its authority, constitute the supreme law of the land. As such, federal law preempts state law if there is a conflict or if federal law specifically states that it preempts state law, as is the case with administrative wage garnishment. You are still entitled to due process, however, before an administrative wage garnishment can start. This means that the Department of Treasury must provide you with notice and a reasonable opportunity to be heard and present evidence in your favor before it can commence the administrative wage garnishment.
As stated in the article, you are entitled to a hearing before the Department of Treasury commences administrative wage garnishment. You have rights and you should have assertive legal representation to assert those rights. Contact us to learn more about our Administrative Wage Garnishment defense services.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. Client received the SBA's Official 60-Day Notice with the debt scheduled for referral to Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-Day Notice and prevent enforced collection by Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.
Client personally guaranteed SBA 7(a) loan for $150,000. COVID-19 caused the business to fail, and the loan went into default with a balance of $133,000. Client initially hired a non-attorney consultant to negotiate an OIC. The SBA summarily rejected the ineligible OIC and the debt was referred to Treasury’sBureau of Fiscal Service for enforced collection in the debt amount of $195,000. We were hired to intervene and initiated discovery for SBA and Fiscal Service records. We were able to recall the case from Fiscal Service back to the SBA. We then negotiated a structured workout with favorable terms that saves the client approximately $198,000 over the agreed-upon workout term by waiving contractual and statutory administrative fees, collection costs, penalties, and interest.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
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