Sba Offer In Compromise Calculator

This calculator provides an unofficial estimate for an SBA Offer in Compromise (OIC). The final amount will be determined by the SBA and your lender based on a thorough review of your financial situation.

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What is an SBA Offer in Compromise?

An SBA Offer in Compromise (OIC) is a program that allows borrowers who have defaulted on a Small Business Administration (SBA) loan to settle their debt for less than the full amount owed. This is a viable option for business owners experiencing significant financial hardship, where the full repayment of the loan is not possible. The core principle of the OIC program is to arrive at a settlement amount that is a realistic reflection of what the lender could expect to recover through forced collection proceedings. To be eligible, the borrower’s loan must be in liquidation status, they cannot be in bankruptcy, and there must be no evidence of fraud or misrepresentation. It’s important to understand that an OIC is not a right, but a privilege granted by the SBA based on a thorough review of the borrower’s financial situation.

SBA Offer in Compromise Formula and Explanation

There is no official, rigid formula for calculating an SBA Offer in Compromise. Instead, the offer amount is determined through a detailed financial analysis. The goal is to calculate a reasonable offer that reflects the amount the SBA could likely recover through enforced collections. The calculation is primarily based on the borrower’s “reasonable collection potential” (RCP).

A simplified formula to understand the concept is:

Estimated OIC = Net Realizable Asset Value + Present Value of Future Income

Here is a breakdown of the variables:

Variable	Meaning	Unit	Typical Range
Net Realizable Asset Value	The amount of money that could be obtained from selling your assets after deducting any associated selling costs and outstanding loans against those assets.	Currency ($)	Varies greatly depending on individual assets.
Present Value of Future Income	Your projected disposable income over a certain period (typically 24-60 months), discounted to its current value.	Currency ($)	Depends on income, expenses, and earning potential.

Practical Examples

Example 1: Sole Proprietor with Modest Assets

A former small business owner has a remaining SBA loan balance of $150,000. Their business has closed. They have $5,000 in a savings account, a car worth $3,000, and no real estate. Their monthly income is $4,000, and their expenses are $3,800, leaving a disposable income of $200 per month.

• Inputs:
  • Remaining Loan Balance: $150,000
  • Cash Assets: $5,000
  • Other Assets: $3,000
  • Monthly Disposable Income: $200
• Calculation:
  • Net Asset Value: $5,000 (cash) + $3,000 (car) = $8,000
  • Future Income Value (over 48 months): $200 * 48 = $9,600
  • Estimated OIC: $8,000 + $9,600 = $17,600
• Result: A reasonable offer might be in the range of $15,000 – $20,000.

Example 2: Homeowner with Higher Income

A borrower owes $300,000 on an SBA loan. They own a home with $100,000 in equity and have $15,000 in savings. Their monthly income is $8,000, and expenses are $6,000, for a disposable income of $2,000 per month.

• Inputs:
  • Remaining Loan Balance: $300,000
  • Real Estate Equity: $100,000
  • Cash Assets: $15,000
  • Monthly Disposable Income: $2,000
• Calculation:
  • Net Asset Value: $100,000 (equity) + $15,000 (cash) = $115,000
  • Future Income Value (over 60 months): $2,000 * 60 = $120,000
  • Estimated OIC: $115,000 + $120,000 = $235,000
• Result: This borrower would need to make a substantial offer, likely exceeding $200,000, due to their significant assets and income.

How to Use This SBA Offer in Compromise Calculator

This calculator is designed to give you a starting point for understanding what a potential OIC might look like. Here’s how to use it effectively:

1. Enter Loan Details: Start by inputting your original and remaining SBA loan balances.
2. Input Your Assets: Be as accurate as possible with your cash, real estate equity, and other valuable assets.
3. Detail Your Income and Expenses: Provide your total monthly household income and expenses to determine your disposable income.
4. Calculate: Click the “Calculate Estimated Offer” button to see a range for a potential OIC.
5. Review the Results: The calculator will provide a primary result, which is the estimated offer range, along with intermediate values that show how the offer is broken down.

For more information, you may want to review resources on how much to offer for an SBA OIC or the elements of a successful offer.

Key Factors That Affect an SBA Offer in Compromise

• Value of Your Assets: The more assets you have, the higher the expected offer.
• Future Earning Potential: Your ability to earn income in the future is a major consideration.
• Cooperation and Character: Being transparent and cooperative with your lender can positively influence the outcome.
• Cost of Collection: The SBA will weigh the cost of pursuing legal action against the value of a settlement.
• Accuracy of Financial Disclosure: Providing complete and accurate financial information is crucial.
• Hardship Documentation: You must be able to prove genuine financial hardship.

Understanding the requirements for an offer in compromise is the first step toward a successful negotiation.

Frequently Asked Questions (FAQ)

1. What is the minimum offer the SBA will accept?

While there is no official minimum, offers under $5,000 are less likely to be accepted unless there is extreme hardship.

2. Can I pay my OIC in installments?

A lump-sum payment is preferred, but installment plans of up to three years may be considered.

3. Do I need a professional to help me with an OIC?

While not required, an experienced professional, such as an attorney or financial consultant, can significantly improve your chances of a successful OIC. You can find guidance from sources like Clearly Acquired’s OIC guide.

4. What happens if my OIC is rejected?

If your offer is rejected, you may be able to submit a revised offer. It’s important to understand the reasons for the rejection to improve your next proposal.

5. Will an OIC affect my credit score?

Yes, a defaulted SBA loan and an OIC will have a negative impact on your credit score. However, it is often a better alternative to bankruptcy.

6. Can I get an OIC if my business is still operating?

It is rare, but in some cases, an OIC can be filed while the business is still operating. Typically, the business must be closed and its assets liquidated.

7. What documents are required for an OIC?

You will need to submit a comprehensive application, including SBA Form 1150, a Personal Financial Statement (Form 770), tax returns, and bank statements.

8. How long does the OIC process take?

The process can take several months, from the initial submission to the final decision from the SBA.

Related Tools and Internal Resources

• SBA Loan Offer in Compromise (OIC) Calculator by Second Wind Consultants
• Offer in Compromise Process by Jellum Law
• Offer in Compromise Calculator by Solvable
• IRS Offer in Compromise Pre-Qualifier
• IRS Offer in Compromise FAQs
• Understanding the SBA Loan Offer-in-Compromise (OIC) Process by Rise Alliance