SBA Loan Default Insights & Strategies: Common Risks with SBA Loans

‍

What are the other things that go wrong? I run into this too often. Fraud by the seller. I've had situations where, I'll give you a limousine company, where the guy sold the business, took over, and a week later, the seller opened a competing business down the street, stole all the employees, and left this immigrant with a $2.3 million loan he had no ability to repay.

‍
And that's only one of several. I had one that picked up the client three weeks ago from a rest

aurant property where the books were fabricated. You can't be too careful in doing your due diligence to see what you're actually buying.
There are situations where there's collusion by the bank. You have a bank officer and a seller of a business that have decided they're going to get this thing sold, and there may be things presented to you that aren't true. Again, a due diligence issue.

‍
Got one I mentioned about the tanning franchise and another I've got right now. I've got five clients in the same franchise system that are all failing for the same reason. The franchisor put out manufactured financial statements as people vouching for the business, that are being paid to vouch for the business.

‍
Even businesses closing because of failure, the franchisor has a clause that if they represent that they're failing, they'll be slapped with a lawsuit and a penalty. It's scaring the heck out of these guys.

‍