Everything has a beginning, and an SBA Loan may be the one for your business. However, it is common for businesses to default on their SBA loans and that’s why I thought I should make my contribution on some of the things you can do to save yourself from this long and painful process. Let’s get is started.
Part of Your Business Plan
Some very successful people discourage having a plan B, but that is not necessarily a plan everyone can afford. We are not all the same and just because something worked for someone else does not necessarily mean that it will work for you also. If you are going to take a loan – any loan – make sure you know what you are going to do if the worst happens. Planning to the end of time will save you a lot of time, money, and unnecessary trouble.
Part of your business plan should include a back-up plan for in case you choose to default the SBA loan. Lucky for you, I’ll share some of the contingency plans you can include in your business plan.
If you are going to get a loan, you should ensure you have a solid plan for settling it. The good thing with taking loans for businesses is that usually, these assets generate income, and can be a long-term money tree IF MANAGED WELL!
My idea here is that you should manage your business well such that you don’t have to default. Most companies are forced to default their SBA Loans due to either poor financial management, or other areas that affect the flow of income.
I know it may not necessarily be anyone’s fault because life can sometimes seem against us (like miscalculating how big the market of your business is), but if you have a solid plan and good management, even errors like miscalculations can be dealt with without having to sink the ship.
Learn from the Delinquents
You are delinquent in your SBA loan when you are behind in your payments. For this instance, diligence is your best friend. You won’t know you are lagging in your payments unless you are paying attention to your finances.
The moment you are late on your first payment, your financial senses should be hyperactive. Being delinquent in your SBA loan is a bad sign, and it means you should be careful. Know why you are behind on your payments and whether things will soon get back on track or it is time to start considering reaching out to an SBA Offer in Compromise consultant.
If Symptoms Persist, Communicate
In case you’ve done all your best, but you’ve determined that things are just not working out for you or there will be challenges in the coming few months, it’s best you communicate.
Talk to the bank you got the loan from and let them know about your status so that they determine whether they can help make things easier for you. The bank does not want to lose its money either, and in as much as they may be forced to take your assets if you default, they are also not so excited about the defaulting procedure – it’s hectic for all stakeholders. Therefore, the bank is likely to help you out as much as possible so that defaulting is only a last resort outcome.
I’m sorry for ending things this way, but sometimes you have to do what you have to do. It is not about defaulting, but when you default. It is better to default as soon as you determine that things are not going to work out for you than to wait until the process has drained you silly by trying to avoid it or hiding from those you owe.
I know the title says SBA default prevention measures but a good prevention measure also involves anticipating the worst case scenario. In this case, having a contingency plan like this in place will save you from wasting more time and money than you should.