Charles Cooper is the Web Editor for America’s Best Companies. He came to ABC with nearly twenty years of business and technology writing and editorial experience. In addition to ABC, Charles has been tapped to be a freelance business writer with the upcoming American edition of The China Daily, has served as a writer for HowStuffWorks.com and LovetoKnow.com and as senior editor for Gear Technology magazine. Contact Charles.

I'm sorry to say I don't have much advise to give as I am in a similar if not worse condition myself. My wife and I started a computer store 4 years ago and up until this past year have more than doubled the income each year. That sounds good until you look at the facts. To properly start the business with the capital it needed would have took around 300K dollars. We started with 120K and all things considered did well. We were only able to take a salary for the first 3 months and have since received no income since April 2006. We have all of our money in it and have run our credit cards, credit line and second mortgage to it's limit just to survive on until the store was able to start us back on our salaries. I developed a very rare neurological disorder the second year and have been in and out of the hospital since. We have been unable to find an investor or obtain further financing and although we have somehow survived with our credit intact, we now have two weeks to close it down. Everything we own is on the notes for the business and due to my health condition, I can't get another job and because of the nature of the disease, my wife can't work because I require 24 hour assistance. We have had several close calls that almost ended my life and there is no cure for what I have. We talked the bank into refinancing our loan one more time which buys about 6 weeks before we start messing up our credit followed by foreclosures on our home and assets. I have somehow got to either find an investor who can see the potential the company has given the proper finances or find some type of work I can do from my home computer to make enough to pay off the debts and survive on. I can only pray for you as both my wife and I are now praying for ourselves. None of the government agencies will help and it seems as if no one cares. When I think of the large corporate bail outs it makes me sick to my stomach. There are many small, honest businesses that need help more than they do yet we have no options. Try talking to as many banks as you can and see if any will set up some type of structured loan you can afford to pay. Only other option is a bankruptcy and I am not sure if that would help on an SBA loan. Best of luck to you and all the other small businesses the government is turning their heads to. I guess it takes being crooked to make it in this world and I will never go there. I may end up in a shelter or a tent in the woods but I will know in my heart I tried my best and I was honest and fair.

Chris Elrod

There's a ton of good reading on SBA workouts at this blog:

http://dtod.wordpress.com/2008/12/09/yes-the-impossible-is-posssiblesba-workouts-can-work-very-well-indeed/

The blogger is very helpful for free on the phone. Can't hurt to try. Call and ask for Don or Jim.

please send details about tis

After trying to work with the banks and franchisor to lower our operating costs, a partner and I closed our business in December 2007 and committed Bankruptcy. Since all of our bills were current and taxes paid, the main issues were supply contracts, services, building lease, Franchise obligations, and SBA Loan.

The bank that holds our SBA loan has never done anything with our "offers" and has not replied after 18 mos. They have leins on both our residential property.

Since I paid $10K to principal on my first mortgage last year, I am desperate to get them off as a lein holder. I have tried to reason with them to discuss a reasonable workout. If the house goes into foreclosure, they wont get anything since the sale would barely cover the first mortgage after all the legal and realtor fees. I don't understand why they wouldn't try to get as much as they can in exchange for removing the lien? I have sent 2 letters and made several phone calls and cannot get them to discuss it. It looks as though my only option is foreclosure. I plan to stop payments next month as a last ditch effort to get them to talk to me, otherwise my family and I will be looking for somewhere to live.

Is there a way to find out if the SBA has paid the bank the guarantee? I am in default on an SBA 7a loan and have been told the SBA paid the bank the 75% guarantee. This bank purchased the loan from the FDIC for about 50 cents on the dollar. Now this bank is trying to collect from me too. Isn't this double dipping? Any suggestions?

Forgot to mention my email address: JasonTees.com

Charles, Nice article. I add to it, we specialize in negotiating significant discounts of SBA guaranteed loans and have had great success in this area of debt workout. I invite your readers to look into our services, it can be done. Don Todrin. Second Wind Consultants.com

Can anyone direct me? In the aftermath of Hurricane Katrina, I secured an SBA loan to repair my home. Loan was based on two incomes. My husband passed since then, and I have been trying to get the SBA to either forgive the debt or reduce the payment. They have granted me a three month deferment, but it won't help. I can't make the entire payment in three months either. My question is what happens if I file bankruptcy and let my home go into foreclosure? It is important to note that there is a first mortgage on my home through a bank. The SBA is second leinholder. Will I be responsible for the money owed to the SBA as I know the home will not sell for what I owe on it and the bank will take their share with the balance going to the SBA, which will not be enough to cover my debt to them. Can anyone out there advise me? The SBA doesn't seem to want to answer me on this.

There is a very good option called an Offer in Compromise, which has the potential of lowering your payoff to affordable losses if effectively utilized. We have been very successful in approaching this problem and reducing debt. It s not about negotiating, it is about following the procedure and strategiess we have developed and reducing the debt. It can be done. Dtod@secondwindconsultants.com

I disagree that SBA loans are "sub-prime" loans or loans of last resort. They can be used for strong businesses as a way to preserve cash.

I have been working with a food distributor who is very cash strapped. Most would argue it is because of the overall economy but that is only part of the story. Upon further research, I learned the principals purchased their real estate for their business 2 years ago using a conventional product. That required them to inject $1 million for a $4 million piece of property (or 25%). I suspect they also used an operating line as part of their equity source as well.

Imagine if they used an SBA product for only 10% equity injection. For a $4 million property, the principals would have only needed to inject $400K rather than $1 million and the debt service on a 504 loan of this size would have been close to the same amount they are paying now. Do you think that extra $600K would be helpful now?

Now off of my soap box. The issue you have is more with the Bank than the SBA. What you need to do is to speak to the District Office in your area directly for advise. Although you are co-signers and you pledged your home, this was more for the Bank's comfort than an SBA requirement. Technically, if your home value is more than 75% LTV, the SBA does not consider there is any equity there. Make sure the Bank is in contact with the SBA National Office (in Fresno or Sacramento) to ask what to do. In many cases, the SBA may not require the Bank to liquidate the home if there is not material value in doing so.

Wow, I never knew that SBA Loan Default: Any Suggestions. That's pretty interesting...