SBA Debt: What To Expect When Acquiring A SBA Offer In Compromise
Getting into debt with the SBA can be scary. The letters start coming, the phone calls ramp up, and you feel overwhelmed. But there is hope – the SBA offer in compromise program can help relieve some of that debt burden. This article will walk you through what to expect when acquiring a SBA offer in compromise, including the process, timeline, eligibility, and tips for success.
What is a SBA Offer in Compromise?
A SBA offer in compromise allows a business owner with SBA loan debt to settle that debt for less than the full amount owed. It provides relief for those facing financial hardship who can’t reasonably pay back the full debt amount.The SBA will review your financial situation, including income, expenses, assets, and liabilities. If they determine you can’t pay the full debt amount without undue hardship, they may accept a lump sum payment for a discounted amount to consider the debt settled.
Who is Eligible for a SBA Offer in Compromise?
To be eligible for a SBA offer in compromise, you must:
- Have an outstanding, non-discharged SBA loan debt
- Be facing financial hardship where you cannot pay the full debt amount
- Have little to no ability to borrow additional funds
- Have insufficient assets and income to pay the debt in a reasonable time period
The SBA will thoroughly review your financial situation to determine if you meet the hardship eligibility requirements. Things like fair market value of assets, ongoing income sources, and the ability to borrow money are considered.
The SBA Offer in Compromise Process and Timeline
Here is what you can expect if you pursue a SBA offer in compromise:
1. Initial Request
You start the process by submitting an initial request and financial disclosure forms to the SBA. This provides an overview of your situation and why you are seeking debt relief.Timeline: 1-2 weeks to submit the request and documents.
2. Review and Follow Up
The SBA will review your initial request and financial documents. They may come back with questions or ask for additional documentation. Respond promptly and thoroughly to any SBA inquiries.Timeline: 4-8 weeks for the SBA to review and follow up.
3. Proposal Letter
Once the SBA has a complete understanding of your financials, they will send a proposal letter. This will outline the lump sum payment amount they are willing to accept to consider your debt settled.Timeline: 6-10 weeks to receive the proposal letter after you have provided all documentation.
4. Acceptance and Payment
If you accept the SBA’s offer, you must sign the acceptance documents and pay the lump sum amount by the deadline provided. This is usually 30-60 days from the date of the proposal letter.Timeline: 30-60 days to make the lump sum payment once you accept the terms.So in total, expect the SBA offer in compromise process to take 3-6 months from your initial request to payment and settlement of your debt.
Tips for SBA Offer in Compromise Success
Here are some tips to increase your chances of getting SBA debt relief through their offer in compromise program:
- Act sooner rather than later – The more delinquent your loan, the less likely the SBA is to accept a discounted payoff.
- Gather documents upfront – Have tax returns, bank statements, business records, and anything related to your finances ready to provide.
- Be honest – Accurately disclose your full financial situation. Any deception could invalidate the offer.
- Research settlement amounts – Learn what settlement percentages are reasonable to propose based on your situation.
- Enlist professional help – Consider hiring an accountant or lawyer experienced with SBA offers in compromise.
- Plan for the tax impact – The cancelled debt may be treated as taxable income. Consult a tax pro.
- Consider other options first – Make sure the offer in compromise is the best solution before pursuing it.
- Act quickly if accepted – Compile the lump sum payment as soon as possible after receiving the proposal letter.
- Appeal if denied – You can appeal a denial and provide additional supporting documentation.
With some preparation, understanding of the process, and professional guidance, you can submit a successful SBA offer in compromise request. While not guaranteed, this program provides an excellent opportunity to resolve unpayable SBA loan debts.
Alternatives to Explore If You Don’t Qualify
If you don’t qualify for a SBA offer in compromise, here are some other options to discuss with your lender:
- Loan modification – Adjust terms like interest rate or length to reduce payments
- Payment plan – Set up smaller installment payments over time
- Deferment – Pause payments temporarily if you’re facing hardship
- Forbearance – Make reduced payments or pause payments for 12 months
- Partial claim – SBA pays a portion of what you owe to your lender
- Bankruptcy – Discharge of debt as last resort if qualified
Don’t give up hope if the SBA offer in compromise doesn’t work out. Keep communicating with your lender to discuss arrangements and relief programs that may help you tackle your SBA loan debt.
Finding Help From Credit Counseling Agencies
If you need guidance with assessing your options, negotiating with the SBA, and mapping out a debt repayment plan, consider contacting a non-profit credit counseling agency. They provide free or low cost services to help consumers address unmanageable debt burdens.Here are some well-known, reputable credit counseling agencies you can turn to:
- National Foundation for Credit Counseling
- Money Management International
- GreenPath Financial Wellness
Credit counselors can help you understand the offer in compromise process, complete paperwork, gather documentation, and increase your chances of success. They can also help with managing debt and finances should your offer get denied.
Don’t Delay – Take Action Today
The SBA offer in compromise program provides real debt relief, but you have to take action to pursue it. The process takes time, so start today by requesting an application form online or contacting the SBA directly.With a little effort and patience, you could settle your SBA loan debt for a fraction of what you owe. Don’t let fear, embarrassment, or lack of knowledge stop you from seeking help – it’s out there! Take control of your debt situation and get on the path to financial freedom.