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Common Mistakes to Avoid When Applying for an SBA Offer in Compromise

In the realm of Small Business Administration (SBA) offers in compromise, many entrepreneurs find themselves entangled in a web of complexity and confusion. It's crucial to approach the process with a clear understanding of the requirements and pitfalls to avoid. Here at Protect Law Group, we have compiled a comprehensive guide to help you navigate through the potential pitfalls and common mistakes encountered when applying for an SBA offer in compromise. By familiarizing yourself with these critical errors, you can enhance your chances of success.

Insufficient Documentation: When applying for an SBA offer in compromise, the importance of documentation cannot be overstated. Inadequate or incomplete documentation can lead to delays, rejections, or even a complete dismissal of your application. Ensure that you gather and organize all the necessary paperwork, including financial statements, tax returns, bank statements, and other supporting documents. Comprehensive documentation establishes credibility and reinforces your case, significantly increasing your chances of success.
Failure to Meet Eligibility Criteria: The SBA has specific eligibility criteria that must be met for an offer in compromise to be considered. One common mistake is applying for an offer without meeting these criteria, leading to automatic rejection. Ensure that you thoroughly review the SBA's guidelines and eligibility requirements before proceeding. By understanding the criteria and tailoring your application accordingly, you can position yourself for a successful outcome.
Inaccurate Valuation of Assets: Accurately valuing your business assets is crucial for a successful SBA offer in compromise. Overestimating or underestimating the value of your assets can have significant consequences, impacting the acceptance or rejection of your application. It is advisable to consult with professionals who can provide an objective assessment of your assets' worth. A precise valuation demonstrates transparency and credibility, increasing your chances of acceptance.
Lack of Understanding Regarding Reasonable Collection Potential: The concept of reasonable collection potential (RCP) plays a pivotal role in SBA offer in compromise evaluations. RCP is an assessment of your ability to repay your outstanding debts based on your income, expenses, assets, and liabilities. Many applicants make the mistake of overlooking this critical factor, resulting in a flawed application. Take the time to thoroughly understand RCP and ensure that your financial calculations accurately reflect your true repayment potential.
Inadequate Negotiation and Communication Skills: When it comes to negotiating with the SBA, effective communication and negotiation skills are paramount. Many applicants underestimate the importance of clear, concise, and persuasive communication throughout the process. Take the time to craft a well-written, professionally presented application that clearly outlines your financial situation, hardships faced, and your proposed resolution. By effectively conveying your case and presenting a compelling argument, you can significantly increase your chances of acceptance.
Missed Deadlines and Incomplete Applications: Deadlines are non-negotiable when it comes to submitting an SBA offer in compromise. Missing a deadline or submitting an incomplete application can result in immediate rejection. To avoid this mistake, meticulously review the requirements and ensure that all necessary documents are included. Set reminders for key submission dates, allowing ample time for any potential delays. By submitting a complete and timely application, you demonstrate your commitment and professionalism to the SBA.
Failure to Seek Professional Assistance: Navigating the complex terrain of an SBA offer in compromise can be overwhelming for many entrepreneurs. One of the most critical mistakes is attempting to tackle the process alone, without seeking professional assistance. Working with experienced professionals who specialize in SBA offers in compromise can provide invaluable guidance, increase your chances of success, and help you avoid costly mistakes. They possess the knowledge and expertise

The attorneys at Protect Law Group have years of experience dealing with the SBA. Contact us to today to set up a case evaluation.

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure

Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements

Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.

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$150,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

Client personally guaranteed SBA 7(a) loan balance of over $150,000. Business failed and eventually shut down. SBA then pursued client for the balance. We intervened and was able to present an SBA OIC that was accepted for $30,000.

$50,000 SBA 7A LOAN - RESPONSE TO SBA OFFICIAL 60-DAY NOTICE

Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.

Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.

$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.

Common Mistakes to Avoid When Applying for an SBA Offer in Compromise