How to Find SBA Debt Relief

If you’re having trouble repaying your SBA loans—loans backed by the government’s Small Business Administration—seek out SBA debt relief as soon as possible. Failing to repay your SBA loans as agreed can have serious consequences and lead to aggressive collection tactics.

Here’s what you need to know about SBA debt relief and how to get it.

What is SBA Debt Relief?

SBA debt relief refers to the various assistance and hardship options offered through the Small Business Association and lenders who issue SBA loans. As a borrower, your options will vary depending on the: 

• Type of loan

• Lender or loan servicer 

• Balance on your loan 

• Type of hardship

For businesses that can't pay, there are specific debt relief programs in place that may be able to help (more on this below). 

You could also seek assistance from your lender directly. This help might include deferring your loan payments (paying them at a later time), restructuring your repayment terms, negotiating a smaller balance, reducing your payment amount or interest rate, or settling your debt entirely. These options will vary by lender and loan program.

What happens if you default on an SBA loan?

The important thing is to seek help when you need it. Failing to pay your SBA loans as directed could seriously impact your life and finances. The government could:

• Withhold tax refunds and Social Security benefits

• Garnish your wages, meaning withhold part of your paychecks automatically

• Deny you other federal loans (including federally backed mortgage loans, student loans, and more)

• Charge collection fees, often as high as 30% of your total debt balance

• Take legal action against you

• Revoke your professional or vocational license

• Place a lien against your property

• Seize the collateral securing the loan (your shop, equipment, vehicle, etc.)

You may also find yourself on the receiving end of aggressive collections attempts. Collection efforts could continue for years or even decades if the debt remains unpaid. Also, your personal credit score could take a hit.

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What Kind Of SBA Debt Relief Is Available?

The only official debt relief options that the Small Business Administration had in place were those for pandemic-related hardship. These options are mostly expired at this time.The exception is for certain Paycheck Protection Program (PPP) loans. Specifically, if your loan has yet to mature, you may still be able to apply for forgiveness. 

The SBA says: "Borrowers can apply for forgiveness any time up to five years from the date that SBA issued the SBA loan number."

See the SBA's guidance on PPP loan forgiveness for more information.

SBA Small Business Debt Relief Program

The SBA Small Business Debt Relief Program was designed to help vulnerable businesses survive ‌the COVID downturn. Under the CARES Act, the SBA covered six months of regular monthly payments for borrowers with a 7(a), 504, or Microloan in regular service as of March 1, 2020.

The SBA Small Business Debt Relief Program is no longer available.

SBA Debt Relief Options Through Your Lender Or Servicer

The Small Business Administration rarely issues loans directly. Instead, private lenders fund these loans with the SBA’s backing and then transfer the loan to a servicer to keep records and manage payments.

It’s usually better to contact your lender or servicer directly when you’re having difficulty making payments. They may have specific relief or assistance programs they can offer you or be willing to restructure your loan. 

Some common business debt relief options include:

• Extending your repayment period. Your lender may allow you to lengthen your loan term, for example, from 10 years to 20 years.This move lets you spread your balance over a longer period, thus lowering your monthly payments and making them easier to pay. Keep in mind: This will mean paying more in long-term interest, so consider this carefully before extending your loan term.

• Modifying your loan. Your lender may also offer to make other modifications like reducing your interest rate. This can lower your monthly payment and make repaying your balance easier.

• Deferring your loan or putting it in forbearance. Deferral and forbearance put your payments on pause due to financial hardship. These amounts are usually added to the end of your loan term, though there can be other arrangements. Interest may or may not accrue on these plans.

• Settling your loan balance. In some cases, a lender may be willing to settle the debt entirely. They may allow you to pay a smaller balance in exchange for repaying it immediately.

Contact your lender’s customer service department to get the full breakdown of what kind of relief might be available in your case. You should also be ready to provide documentation related to your hardship. Lenders often require this before assistance can be issued.

Where Else Can I Find Business Debt Relief?

If you’re not eligible for help or you’re uncomfortable negotiating directly with your SBA lender or servicer, you can consider these options:

• Employ a debt relief company. These companies work on your behalf to negotiate a settlement for your SBA loan and other debts you might be dealing with. Even if your SBA loan isn’t eligible for debt settlement, your other debts might be. If you clear your eligible debts, that could make it easier to keep up with the debts that aren’t negotiable.

• Hire a debt relief attorney. They can be helpful if you’re dealing with constant collections attempts that feel aggressive or harassing. They can also help if the government has started garnishing your wages or taking other extreme measures in light of your non-payment.

• File for bankruptcy. With Chapter 7 bankruptcy, you may completely discharge your SBA loans (meaning you won't need to repay them) and various credit cards, loan balances, and other debts you're unable to pay back. Only those with the lowest incomes are eligible for Chapter 7. With Chapter 13 , you pay into a court-ordered plan for three to five years to repay some or all of what you owe. After making all prescribed payments, any remaining balances are discharged. 

Consider bankruptcy only after carefully weighing the consequences. Bankruptcy creates a public record that anyone can see, and it can stay on your personal credit report for seven to 10 years. On average, bankruptcy drops your credit scores between 130 and 200 points.

SBA Debt Relief Vs. Consolidation Vs. Refinancing

The SBA Small Business Debt Relief Program was a short-term measure related to the pandemic, and it only applied to specific types of debt.

Business debt refinancing is when you use a new loan or credit card to pay off existing business debt. The goal is usually to reduce your interest rate. For example, if you have a $5,000 business loan at 15% APR, you could save money by refinancing with a new loan that has a lower 10% APR.

Business debt consolidation is when you use one larger loan to pay off several smaller loans or credit cards. Consolidation can simplify your payments, giving you one due date instead of many.

You can both refinance and consolidate your business debt at the same time if you have multiple high-interest debts you want to bring under one lower-rate loan. Your ability to qualify for a loan with a lower rate will depend on your:

• Business credit score (if you have an LLC or corporation)

• Personal credit score (if the loan requires a personal guarantee)

• Current APR

• Existing debt balances

• Assets and/or collateral

Get help with SBA debt relief

If you’re wondering where to find business debt relief, start with a free debt evaluation. A debt expert can detail your full range of options and point you toward the most appropriate one for your goals, budget, and finances. SBA debt relief professionals may also be able to help you deal with other unmanageable debts by putting you into a debt management plan. These can be good options if you have several large debts you’re unable to pay.