Loan Dispute Litigation

Borrowers who take out a business loan and sign a business promissory note have a contractual obligation to make their payments and to adhere to the terms of the loan.

You may have grounds for litigation if your borrower breaches the contract in any of the following ways.

1. By failing to pay the debt as owed.
2. By using the money from your loan for purposes other than the agreed-upon purpose.
3. By failing to adhere to certain loan covenants, such as failing to maintain business insurance, by taking on additional debt, or by failing to remain up to date on tax payments.
4. By falsifying borrower representations.

You may be eligible to receive damages, take possession of collateral, seize business assets, and seek compensation via garnishment. In certain cases, you may even be able to seize the borrower’s personal assets.

If your borrower is acting in good faith and contacts you about difficulties they are having with loan payments or covenants, you may opt to offer a short-term loan workout agreement. These agreements most often include loan modifications or forbearance agreements designed to give the business owner time to rectify the problem.

Starting with a workout agreement can be beneficial as it can help shield you from a borrower’s countersuit. In some cases, they can even salvage the relationship, leading to an eventual payoff rather than a defaulted loan.  While workouts can sometimes save time and money, it’s important to know when to compromise with a borrower and when you should pursue legal options.  We can help evaluate your situation and advise you on whether to work it out or move it forward based on the borrower’s past and present litigation history and records or judgments or liens against the borrower.

Mediation may also be an option in the early phases of the litigation process. In some cases, it may be less costly and time-consuming to offer the borrower a different deal than it would be to pursue damages to the fullest extent that the law might allow.

While it is often less expensive in the long run to pay for attorney fees on an hourly basis, we also offer select litigation services on contingency. This means you’re working with a lawyer who has a vested interest in working to ensure you win your case. It also means that you avoid taking on new expenses while a recalcitrant borrower ties up funds.

If you’re having business loan issues in Orange County, Los Angeles County, San Diego County, or elsewhere in California, we can help. You can find out more about the contingency business litigation option here, or contact us today.