SBA disaster loan section 8.2 LOAN DECREASE AND CANCELLATION
Understanding when its best to decrease or cancel the loan amount that the SBA has awarded you. If you find that you can qualify for grants and understand that the SBA loan will count against you this is when you would decrease your SBA loan needs.

By Murray Wennerlund published 10-20-2022 updated 10-20-2022



A. At Request of Borrower: When we receive a written or verbal request, we may cancel all or reduce any undisbursed portion of an approved loan.

B. Notification to Borrower Prior to Loan Modification:

1. Before we initiate an action to cancel all or reduce any funds, we must mail a letter giving 14 calendar day notice (letter can be issued by Accounts or Loan Processing) of the pending cancellation/reduction. The letter must specify the action the borrower can take to prevent the cancellation. This letter must specifically inform the borrower that the loan will be cancelled if the borrower fails to submit the requested information.

EXCEPTION: A 14-day letter is not required when the cause for the cancellation is due to the borrower’s request we received notification that the borrower has filed for bankruptcy or SBA receives a foreclosure notice on the damaged or collateral property.

2. Prior to the completion of the loan modification for cancellation of the loan, the Loan Officer should contact the borrower to explain our action, the reasons for the cancellation and the reinstatement rights. The Loan Officer should advise the borrower that written notification is forthcoming which will include information regarding the method and deadline for requesting reinstatement (see paragraph 8.3). If the loan was cancelled in full (no disbursement made) the Loan Officer should also advise the borrower upon approval of the reinstatement request, new loan closing documents may be issued and that the original documents may no longer be valid.


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