Will The Sba Accept My Offer In Compromise[yoast-breadcrumb]
Will The SBA Accept My Offer In Compromise?
The SBA offer in compromise program allows borrowers to negotiate with their lenders for a debt settlement agreement. It isn’t the same as loan forgiveness. You must pay off your debt, but the balance might be adjusted to a lower amount than the original loan. There are some essential aspects of an OIC you must understand, such as:
- Don’t count on loan forgiveness – Other forms of debt relief forgive part or all of a loan. An OIC agreement isn’t the same as loan forgiveness. You should understand how your SBA loan works and what to expect from a settlement arrangement. Total loan forgiveness is unlikely, so you should plan to pay back at least part of what you owe.
- How to Navigate the Offer in Compromise Program… You should be patient during this process. If the SBA approves your application, you must fulfill your end of the agreement by making the payments you promised. A denial doesn’t necessarily mean you’re out of options. You can reapply. Consider hiring an experienced attorney to improve your chances.
- Provide Documentation – The SBA requires information and documentation to review your OIC request. This includes tax returns, financial statements, projections, and details on income and expenses. You must prove financial hardship to get approved.
- Act in Good Faith – Don’t hide assets or misrepresent your finances. Approval depends on full disclosure and acting in good faith. Any deception could lead to criminal charges.
- Weigh Your Options – An OIC takes time and effort with no guarantee of approval. Make sure it’s your best route before applying. Look at all alternatives like bankruptcy or debt consolidation.
You should be patient during this process. If the SBA approves your application, you must fulfill your end of the agreement by making the payments you promised. A denial doesn’t necessarily mean you’re out of options. You can reapply. Consider hiring an experienced attorney to improve your chances.
The SBA requires information and documentation to review your OIC request. This includes tax returns, financial statements, projections, and details on income and expenses. You must prove financial hardship to get approved.
Some examples of financial records you may need to submit include:
- Recent tax returns
- Profit and loss statements
- Balance sheets
- Cash flow projections
- Personal financial statements
- Records of income and expenses
Provide as much documentation as possible to verify your situation. The SBA will thoroughly review your finances to determine if you qualify for a reduced payment amount.
Act in Good Faith
Don’t hide assets or misrepresent your finances. Approval depends on full disclosure and acting in good faith. Any deception could lead to criminal charges.
Be completely transparent about your financial situation. Even minor omissions or exaggerations could raise red flags and lead to denial. Approval is based on proving true inability to repay the full loan amount.
Some examples of bad faith actions that could jeopardize your application include:
- Failing to disclose assets
- Transferring property to friends or relatives
- Providing false or misleading information
- Withholding documentation
- Making luxury purchases before applying
Avoid anything that might appear suspicious or suggest you are trying to hide income or assets. Acting ethically and providing full disclosure is essential.
Weigh Your Options
An OIC takes time and effort with no guarantee of approval. Make sure it’s your best route before applying. Look at all alternatives like bankruptcy or debt consolidation.
Here are some key considerations when deciding if an SBA offer in compromise is right for you:
Every situation is unique, so carefully weigh the pros and cons. Get advice from an attorney or financial advisor to determine if an OIC is your most strategic option.
The SBA offer in compromise program provides an opportunity to settle your business loan debt for potentially less than the full amount owed. However, approval is not guaranteed. You must fully disclose your finances, prove hardship, and act in good faith. Weigh all alternatives before applying. With proper documentation and legal guidance, you may be able to reach an affordable compromise agreement.
- SBA Form 1150 Offer in Compromise
- SBA Offer in Compromise Requirements
- Bradford Law – SBA Offer in Compromise
- SBA Offers in Compromise
Will The SBA Accept My Offer In Compromise?
If you owe money on a debt to the Small Business Administration (SBA), you may be wondering if they will accept a reduced payoff amount. This tactic is known as an offer in compromise. Unfortunately, the chances of the SBA approving an offer for less than the full amount are very low.
The reason is that SBA loans are backed by the full faith and credit of the U.S. government. So the SBA is generally unwilling or unable to settle for less than 100% payoff. But that doesn’t mean you shouldn’t try. Here’s what you need to know about proposing an offer in compromise to the SBA.
Background on SBA Loan Programs
The SBA provides support to small businesses through various lending programs. Some of the most common types of SBA loans include:
- 7(a) loans – For general small business financing needs
- 504 loans – For purchasing real estate and equipment
- Microloans – Small short-term loans up to $50,000
- Disaster loans – For recovery assistance after disasters
Regardless of the program, SBA loans are attractive to borrowers because they offer longer repayment terms, lower down payments, and lower interest rates compared to conventional financing.
Key Points About SBA Loans:
- Loans are funded by private lenders but guaranteed by the SBA
- The SBA promises to repay a portion of losses if the borrower defaults
- Collateral and personal guarantees are often required
- Default can result in the SBA taking collection actions
Because the government is on the hook for losses, the SBA is highly motivated to recover the full loan balance when borrowers default.
Proposing an Offer in Compromise
Despite the challenges, it still may be worthwhile to approach the SBA with an offer for less than full repayment. Here are some tips for submitting an SBA offer in compromise:
Send a Well-Supported Proposal
Clearly explain your financial hardship and why you cannot afford to repay the full amount. Provide extensive documentation like tax returns, bank statements, and lists of income and expenses.
Offer a Reasonable Settlement Amount
Proposing to settle a $100,000 loan for $1,000 will likely be rejected. Offer an amount aligned with your assets, income, and ability to get financing.
Suggest a Lump Sum or Short-Term Payout
The SBA usually responds better to lump sum or short payoff timelines versus small payments over many years.
|Better Options||Less Desirable Options|
|Lump sum payment||Small monthly payments over many years|
|Payoff within 6 months||Payoff over more than 2 years|
The SBA may be more inclined to settle if you propose an offer before they begin collection lawsuits and other aggressive actions.
Hiring an experienced attorney to help formulate your proposal and negotiate can also maximize your chances of acceptance. An attorney understands what facts and figures the SBA wants to see.
Other Alternatives if Offer is Rejected
Unfortunately, it’s quite possible the SBA will reject your compromise offer and demand full repayment. If that happens, here are some other options that could help:
Ask About Loan Consolidation or Refinancing
The SBA may allow you to combine multiple loans into one and/or refinance at a lower interest rate. This won’t reduce the amount owed but can make payments more affordable.
Request Temporary Loan Forbearance
You may qualify to temporarily postpone or reduce loan payments for reasons like financial hardship, medical problems, military service, etc.
As a last resort, filing Chapter 7 or Chapter 13 bankruptcy may discharge all or part of the SBA loan debt.
The key is not waiting until your finances spiral out of control before taking action. Be proactive in communicating with the SBA and exploring options – the sooner, the better.
Getting the SBA to approve reducing an outstanding loan balance is certainly an uphill battle. Their priority is safeguarding taxpayer money funding the loan guarantees. But presenting a well-supported hardship case and compromise amount could convince them some payoff is better than none. With persistence and creativity, you may be able to negotiate debt relief with the SBA.