Your Best Path to SBA Debt Relief: OIC vs. Negotiated Workout

When facing the default of an SBA loan, business owners often feel a profound sense of pressure and uncertainty. Understanding your options is the first step toward reclaiming financial stability and securing lasting business debt relief. For many, the path forward involves either an SBA Offer in Compromise (OIC) or a structured loan workout. As experienced SBA loan attorney professionals, we help you carefully evaluate your situation to choose the strategy that offers the best outcome for your specific SBA debt challenge.

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When facing the default of an SBA loan, business owners often feel a profound sense of pressure and uncertainty. Understanding your options is the first step toward reclaiming financial stability and securing lasting business debt relief. For many, the path forward involves either an SBA Offer in Compromise (OIC) or a structured loan workout. As experienced SBA loan attorney professionals, we help you carefully evaluate your situation to choose the strategy that offers the best outcome for your specific SBA debt challenge.

What is an SBA Offer in Compromise (OIC)?

An OIC is a formal settlement proposal where we ask the SBA to accept a reduced, lump-sum payment to satisfy the full debt. We typically use this option when the business has closed and the personal guarantor lacks the financial ability to repay the full amount. Our firm thoroughly prepares the complex financial package required to demonstrate a genuine inability to pay and maximize the potential debt reduction.

The Power of a Structured SBA Loan Workout

A negotiated loan workout is designed to make the existing SBA debt manageable for an ongoing business. This involves modifying the loan's terms, such as extending the maturity date, lowering the interest rate, or temporarily deferring payments. We often pursue this option for viable businesses that simply need breathing room due to temporary hardship. This preserves the business while providing crucial business debt relief.

The Attorney’s Role in Protecting Personal Guarantees

Nearly all SBA loans require a personal guarantee, making the debt a personal financial risk after a default. Our primary role as your SBA loan attorney is to minimize this personal liability, whether through an OIC or a workout. We provide comprehensive protection by defending against aggressive collection actions, including Treasury offsets, ensuring your family’s assets are safeguarded while resolving your SBA debt.

Choosing the Right Strategy for Your Financial Future

Selecting between an OIC and a workout is a case-by-case decision requiring deep knowledge of SBA regulations. An OIC may offer the highest percentage of business debt relief but requires a stringent financial disclosure and business closure. A workout focuses on business continuity. Our expertise lies in analyzing your unique circumstances to determine the most effective and aggressive legal path forward.

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If you are struggling with overwhelming SBA debt and need expert guidance, the time to act is now. At Protect Law Group, we have a proven track record of securing favorable outcomes for business owners nationwide. We specialize in navigating the complexities of the SBA and Treasury collection processes to achieve the debt resolution you deserve. Contact us today for a consultation to explore how our SBA loan attorney team can bring you peace of mind and genuine financial freedom.

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Frequently Asked Questions

Your Best Path to SBA Debt Relief: OIC vs. Negotiated Workout

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$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.

Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.

The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.

The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.

$375,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.

$150,000 SBA COVID EIDL - OFFER IN COMPROMISE & RELEASE OF COLLATERAL

Our firm successfully facilitated the SBA settlement of a COVID-19 Economic Injury Disaster Loan (EIDL) where borrower received an SBA disaster loan of $150,000, but due to the severe economic impact of the COVID-19 pandemic, the business was unable to recover.

Despite the borrower’s efforts to maintain operations, shutdowns and restrictions significantly reduced the customer base and revenue, making continued operations unsustainable. After a thorough business closure review, we negotiated with the SBA, securing a resolution where the borrower paid only $6,015 to release the collateral, with no further financial liability for the owner/officer.

This case demonstrates how businesses affected by the pandemic can navigate SBA loan settlements effectively. If your business is struggling with an SBA EIDL loan, we specialize in SBA Offer in Compromise (SBA OIC) solutions to help close outstanding debts while minimizing financial burden.