Liquidating a small business
Guaranteeing the loan means that, should the business default on the loan, the SBA will guaranty the bank 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. By engaging in this process, the lender shifts the risk of loss on the loan to the SBA while still retaining control over loan administration during the time the loan is active.There are two main types of SBA loans: 7(a) and 504.Liquidation in finance and economics, is the process of bringing a business to an end and distributing its assets to claimants. Solvent companies may also file for Chapter 7, but this is uncommon.It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they come due. Not all bankruptcies involve liquidation; Chapter 11, for example, involves rehabilitating the bankrupt company and restructuring its debts.A site visit should be coordinated between the Lender and the Borrow, or each party’s respective counsel.It is likely the situation will arise where a Borrower is either uncooperative or cannot be contacted to schedule a site visit.
If a site visit is required, it must be performed within 60 days of an uncured payment default or within 15 days of any adverse event that caused the transfer to liquidation, such as the business shutting down or bankruptcy being filed.
Its mission statement is “…to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.” It is clear that the strength of today’s economy is making liquidation of these loans more of a priority than in previous decades.
The Small Business Administration (“SBA”) has been providing small businesses with loans since its creation in 1953.
In such case, the Lender may repossess the collateral without the cooperation of the Borrower so long as the means utilized do not breach the peace.
Otherwise, legal action will be required to enforce any contractual default provisions and gain access to the property.
If that does not cover the debt, they will recoup the balance from the company’s remaining liquid assets, if any. These include bondholders, the government (if it is owed taxes) and employees (if they are owed unpaid wages or other obligations).