Legal Considerations for Small Business Owners
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Factors That Can Affect the Success of an SBA Offer in Compromise Application
Book a Consultation CallIn today's challenging economic landscape, many small business owners find themselves struggling to meet their financial obligations, including paying off loans backed by the Small Business Administration (SBA). When facing financial hardship, one option to consider is an SBA Offer in Compromise (OIC) application. However, the success of such an application depends on various factors. In this article, we will explore these key factors that can significantly impact the outcome of your SBA OIC application.
Before delving into the factors that affect the success of your SBA OIC application, let's start by understanding what it entails. An SBA Offer in Compromise is a program that allows eligible small business owners to settle their SBA debt for less than the full amount owed. It is a lifeline for those who are struggling financially and unable to repay their loans in full.
Now, let's take a closer look at the factors that can determine whether your SBA OIC application is approved or denied.
One of the crucial elements in your SBA OIC application is documenting your financial hardship. The SBA will scrutinize your financial records, so it's essential to provide clear and comprehensive documentation of your financial situation. This should include income statements, bank statements, tax returns, and any other relevant financial records.
To convince the SBA that you are genuinely unable to pay your debt in full, you must present compelling evidence. This might include showing that your business has experienced a significant drop in revenue, increased expenses, or other circumstances that have affected your ability to make payments.
When applying for an SBA OIC, you must provide an accurate valuation of your business and personal assets. Overvaluing your assets can lead to your application being rejected. It's essential to provide a realistic assessment of your assets to support your case effectively.
The SBA OIC application process can be complex, with numerous forms to fill out and documents to submit. Any errors or omissions can delay the process or result in a denial. Ensure that you carefully follow the application instructions and double-check all information before submission.
Adhering to the SBA's guidelines and requirements is crucial. Failure to meet their specific criteria can lead to the rejection of your application. Familiarize yourself with the SBA's guidelines and consult with experts if needed to ensure compliance.
Consider seeking professional assistance from attorneys who are experienced in SBA OIC applications. They can help you navigate the complexities of the process, ensuring that your application is well-prepared and stands the best chance of approval.
Submitting your SBA OIC application promptly is vital. Delays can negatively impact your case, and it's essential to meet all deadlines specified by the SBA.
Show the SBA that you are acting in good faith by being cooperative and transparent throughout the application process. A willingness to work with the SBA can be viewed positively.
If you have filed for bankruptcy or are considering it, be aware that it can affect your SBA OIC application. Consult with legal counsel to understand how bankruptcy might impact your case.
Successful negotiation skills can play a crucial role in achieving a favorable outcome. Be prepared to engage in negotiations with the SBA to reach an agreement that benefits both parties.
Your SBA OIC application will be reviewed by SBA officials who will assess the merits of your submission. The thoroughness and accuracy of your application will influence their decision.
In case your SBA OIC application is denied, you have the option to request reconsideration. Understanding this process and seeking legal advice can be beneficial.
Keep in mind that settling your SBA debt through an OIC may impact your credit score. It's essential to weigh the potential consequences against the benefits of debt relief.
Maintaining open and honest communication with the SBA throughout the process is vital. Be prepared to provide additional information or clarification if requested.
Lastly, the SBA OIC process can be time-consuming. Be patient and persistent in pursuing your application. A well-prepared, persistent applicant may ultimately achieve a successful outcome.
Navigating the SBA OIC application process can be challenging, but understanding the factors that can affect its success is crucial. By documenting your financial hardship, providing accurate information, and seeking professional assistance when needed, you can improve your chances of a favorable outcome. Remember that patience and persistence are key, and even if your initial application is denied, there are avenues for reconsideration.
An SBA Offer in Compromise (OIC) is a program that allows eligible small business owners to settle their SBA debt (personal guarantee) for less than the full amount owed, providing relief to those facing financial hardship.
You can prove financial hardship by providing comprehensive documentation of your financial situation, including income statements, bank statements, tax returns, and other relevant records.
Yes, you have the option to request reconsideration. However, the chances are the initial decision will be confirmed.
Yes, settling your SBA debt through an OIC may have an impact on your credit score. It's essential to consider this when exploring your options.
Seeking professional assistance from attorneys who are experienced in SBA OIC applications can be beneficial, as they can help you navigate the complexities of the process and improve your chances of success.
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.
Our firm successfully assisted a client in closing an SBA Disaster Loan tied to a COVID-19 Economic Injury Disaster Loan (EIDL). The borrower obtained an EIDL loan of $153,800, but due to the prolonged economic impact of the COVID-19 pandemic, the business was unable to recover and ultimately closed.
As part of the business closure review and audit, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability for the owner/officer.
This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA Offer in Compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
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