When a business experiences an SBA loan default, they generally have a few options: 1)  Attempt to amend the terms of the original loan.  This can come in the form of a short term deferment, or in the form of a longer term modification.  When applying for a deferment or modification, your lender will ask you for a bunch of information in order to assess whether your business is truly in need, and if its viable enough to warant help.  It's almost like reapplying for the loan all over again.   2)  If the business fails and you need to close shop, the other option is to submit what is known as an OIC (offer in compromise).  The main objective of the OIC is to allow personal guarantors to settle the debt for less than the full balance.  In exchange, the SBA will release the guarantors from any further personal liability.  How much you can settle for is dependant on your personal resources.  It's designed to be an alternative to filing for bankruptcy.  Im many cases, it has no impact on your credit since many commercial lenders don't report to the credit bureaus on commercial loans.   Best of luck!

  Your loan documents will outline the rights that you have and what you lender can do if and when you default. Most lenders will require a personal guarantee - meaning that should your business fail to pay, they will come after your personal assets and future income. My suggestion if you find yourself in this position is to contact your lender - explain the what is going on and try to create a work out deal - something that requires to you to pay less (what you can) and maybe reduces your interest and any late fees. Even if you file for bankruptcy, you still might be obligated to repay the principal, interest, fees and the lender's costs of this whole process.  Best to just try to work something out with them.

Hi, check out our blog on what happens when you default on a business loan at  http://community.sba.gov/community/blogs/expert-insight-and-news/small-business-cents/what-happens-when-i-default-business-loan

In a situation like that, you may need to file for bankruptcy for the business. If you personally signed the loan, it becomes more complicated. You would be responsible for repayment, even if you have no business income. You would need to personally secure a loan or take personal bankruptcy. Not a pretty picture either way.