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SBA LIEN RELEASE FOR CONSIDERATION

March 21, 2024 Uncategorized

The Small Business Administration (SBA) often takes collateral when making loans to small businesses. This collateral acts as security for the loan in case the borrower defaults. The SBA commonly takes real estate as collateral by placing a lien against the property. If the borrower pays off the loan as agreed, the SBA will release the lien so the borrower has clear title to the property again. However, sometimes a borrower wants the SBA to release its lien even before the loan is fully paid off. This is called an SBA lien release for consideration.

What is Consideration?

Consideration refers to something of value being exchanged for the lien release. It could be a lump sum payment, additional collateral, or restructured loan terms that benefit the SBA. The consideration demonstrates good faith on the borrower’s part and gives the SBA an incentive to release its lien before being fully repaid.

Why Would a Borrower Seek a Lien Release?

There are a few common reasons a borrower may request an early SBA lien release:

  • The borrower wants to sell or refinance the collateral property but cannot due to the SBA lien.
  • The borrower is struggling to make payments and wants to restructure the loan terms. They may offer additional collateral or altered payments to persuade the SBA to release its lien on part of the collateral.
  • The property has appreciated significantly, and the borrower wants to take out equity. The SBA may release its lien in exchange for a lump sum payment less than the full loan balance.
  • The borrower wants to use the collateral property in another loan but cannot due to the SBA lien. So they request a release in order to free up the equity.

What Factors Does the SBA Consider?

The SBA will consider several factors when deciding whether to grant an early lien release:

  • Loan Status: Borrowers still early in their loan term are less likely to get a release than those near full repayment.
  • Equity in Collateral: If the property value exceeds the SBA loan balance by a sizable margin, a partial release may make sense.
  • Additional Collateral: If the borrower pledges other valuable assets as additional security, it improves their chances.
  • Loan Guarantees: Personal or business guarantees on the loan strengthen the SBA’s position and make an early release more palatable.
  • Restructured Loan Terms: If the borrower makes concessions like higher payments, that can offset the risks of an early lien release.
  • Borrower’s Financial Position: Strong revenues, profits, and cash flow for the business make it easier for the SBA to release its collateral position.
  • Credit History: Borrowers with excellent credit and a history of timely payments are viewed more favorably than those with poor credit or delays.
  • Purpose of the Release: If the reason aligns with the SBA’s goals like business growth and job creation, that helps the case.

The stronger the borrower looks by these metrics, the better their chances the SBA will agree to an early lien release in return for reasonable consideration.

Christine Twomey
Christine Twomey
2024-03-21
Just had my Divorce case settled 2 months ago after having a horrible experience with another firm. I couldn’t be happier with Claire Banks and Elizabeth Garvey with their outstanding professionalism in doing so with Spodek Law Group. Any time I needed questions answered they were always prompt in doing so with all my uncertainties after 30 yrs of marriage.I feel from the bottom of my heart you will NOT be disappointed with either one. Thanks a million.
Brendan huisman
Brendan huisman
2024-03-18
Alex Zhik contacted me almost immediately when I reached out to Spodek for a consultation and was able to effectively communicate the path forward/consequences of my legal issue. I immediately agreed to hire Alex for his services and did not regret my choice. He was able to cover my case in court (with 1 day notice) and not only was he able to push my case down, he carefully negotiated a dismissal of the charge altogether. I highly recommend Spodek, and more specifically, Alex Zhik for all of your legal issues. Thanks guys!
Guerline Menard
Guerline Menard
2024-03-18
Thanks again Spodek law firm, particularly Esq Claire Banks who stood right there with us up to the finish line. Attached photos taken right outside of the court building and the smile on our faces represented victory, a breath of fresh air and satisfaction. We are very happy that this is over and we can move on with our lives. Thanks Spodek law 🙏🏼🙏🏼🙏🏼🙏🏼🙌🏼❤️
Keisha Parris
Keisha Parris
2024-03-15
Believe every single review here about Alex Z!! From our initial consultation, it was evident that Alex possessed a profound understanding of criminal law and a fierce dedication to his clients rights. Throughout the entirety of my case, Alex exhibited unparalleled professionalism and unwavering commitment. What sets Alex apart is not only his legal expertise but also his genuine compassion for his clients. He took the time to thoroughly explain my case, alleviating any concerns I had along the way. His exact words were “I’m not worried about it”. His unwavering support and guidance were invaluable throughout the entire process. I am immensely grateful for Alex's exceptional legal representation and wholeheartedly recommend his services to anyone in need of a skilled criminal defense attorney. Alex Z is not just a lawyer; he is a beacon of hope for those navigating the complexities of the legal system. If you find yourself in need of a dedicated and competent legal advocate, look no further than Alex Z.
Taïko Beauty
Taïko Beauty
2024-03-15
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence. Thank you team!
Anthony Williams
Anthony Williams
2024-03-12
Hey, how you guys doing? Good afternoon my name is Anthony Williams I just want to give a great shout out to the team of. Spodek law group. It is such a honor to use them and to use their assistance through this whole case from start to finish. They did everything that they said they was gonna do and if it ever comes down to it, if I ever have to use them again, hands-down they will be the first law office at the top of my list, thank you guys so much. It was a pleasure having you guys by my side so if you guys ever need them, do not hesitate to pick up the phone and give them a call.
Loveth Okpedo
Loveth Okpedo
2024-03-12
Very professional, very transparent, over all a great experience
Bee L
Bee L
2024-02-28
Amazing experience with Spodek! Very professional lawyers who take your case seriously. They treated me with respect, were always available, and answered any and all questions. They were able to help me very successfully and removed a huge stress. Highly recommend.
divesh patel
divesh patel
2024-02-24
I can't recommend Alex Zhik and Spodek Law Firm highly enough for their exceptional legal representation and personal mentorship. From the moment I engaged their services in October 2022, Alex took the time to understand my case thoroughly and provided guidance every step of the way. Alex's dedication to my case went above and beyond my expectations. His expertise, attention to detail, and commitment to achieving the best possible outcome were evident throughout the entire process. He took the time to mentor me, ensuring I understood the legal complexities involved to make informed decisions. Alex is the kind of guy you would want to have a beer with and has made a meaningful impact on me. I also want to acknowledge Todd Spodek, the leader of the firm, who played a crucial role in my case. His leadership and support bolstered the efforts of Alex, and his involvement highlighted the firm's commitment to excellence. Thanks to Alex Zhik and Todd Spodek, I achieved the outcome I desired, and I am incredibly grateful for their professionalism, expertise, and genuine care. If you're in need of legal representation, look no further than this outstanding team.

What is the Lien Release Process?

If the borrower has paid down the loan significantly or can provide substantive consideration, here are the steps to request and obtain an SBA lien release:

  1. Contact the SBA loan servicing office and explain the rationale for wanting a lien release. Provide supporting documents like appraisals, financial statements, and details on consideration you will offer.
  2. The SBA will analyze your request against the factors above and perform due diligence on current collateral value.
  3. You will receive either a tentative approval letter or denial from the SBA outlining their decision.
  4. If approved, you can negotiate specific consideration and finalize loan modification or payment terms. Get any agreement in writing.
  5. The SBA will prepare a lien release document to be filed with the appropriate real estate records office.
  6. You pay any agreed upon consideration.
  7. The SBA executes and files the lien release, removing the collateral property from their secured interest in the loan.
  8. You receive a filed copy of the release and may now sell, refinance, or take other action on the property unencumbered by the previous SBA lien.

Things to Remember

Some key points to remember about the SBA lien release process:

  • Seek professional advice from an attorney, accountant, or SBA specialist if unsure how to approach this.
  • The release process takes significant time so plan accordingly. It can be several months from initial request to final approval.
  • The SBA will not put their loan collateral at risk without appropriate offsets and protections in return. Be reasonable in negotiations.
  • Do not close on selling, refinancing, or taking equity out of the collateral property until you have a completed SBA lien release in hand.
  • An SBA release does not terminate your obligations under the loan itself. You must still make payments and comply with loan terms.
  • If your business or financial conditions deteriorate after getting a release, the SBA may demand new collateral or loan modifications.

With careful planning and a compelling case, securing an SBA lien release for consideration can be an effective way to regain control of your collateral for business needs or exit strategies. But understanding the process, risks, and factors involved is critical to achieving the desired outcome.

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