SBA Offer in Compromise Calculator
Estimate your settlement offer based on SBA 1150 guidelines and asset liquidation value.
Suggested OIC Settlement Offer
$0
$0
$0
Formula: Offer = (Net Liquidation Value of Assets) + (60 Months × Disposable Income). This mirrors standard SBA settlement logic.
Settlement Analysis Visualization
Comparison of Total Debt vs. Suggested Settlement Offer vs. Asset Value.
| Asset Type | Market Value | SBA Discount Factor | Net Liquidable Value (NLV) |
|---|
The SBA typically applies a 20-25% discount to real estate and 50% or more to equipment during a forced liquidation analysis.
What is an SBA Offer in Compromise Calculator?
An sba offer in compromise calculator is a specialized financial tool used by business owners and personal guarantors to estimate how much the Small Business Administration (SBA) might accept to settle a defaulted loan. When a business fails and the collateral is liquidated, the “deficiency balance” remains. An sba offer in compromise calculator helps you navigate the complex math of SBA Form 1150.
Who should use an sba offer in compromise calculator? Primarily individuals who have personally guaranteed an SBA 7(a) or 504 loan and find themselves unable to pay the full balance. A common misconception is that the SBA settles for “cents on the dollar” automatically; in reality, the sba offer in compromise calculator must show that the offer equals or exceeds the amount the SBA could recover through litigation or enforced collection.
Using an sba offer in compromise calculator ensures you aren’t guessing. It forces you to look at your “Net Liquidable Value” (NLV) and your “Future Income Potential,” which are the two pillars of any successful OIC submission. Without an sba offer in compromise calculator, your offer might be rejected for being too low, or you might overpay significantly.
sba offer in compromise calculator Formula and Mathematical Explanation
The mathematical core of the sba offer in compromise calculator relies on the present value of assets plus a portion of future earnings. The formula used by our sba offer in compromise calculator is:
Offer = [(Real Estate FMV × 0.80) – Liens] + (Cash) + (Equipment × 0.50) + (Disposable Monthly Income × 60)
Step-by-step derivation for the sba offer in compromise calculator:
- Determine NLV: The sba offer in compromise calculator takes market values and applies “quick sale” discounts.
- Equity Calculation: Subtract existing mortgages. If equity is negative, the sba offer in compromise calculator treats it as $0.
- Future Income: The sba offer in compromise calculator typically looks at a 60-month window of what you can afford after basic living expenses.
| Variable | Meaning | Unit | Typical Range |
|---|---|---|---|
| FMV | Fair Market Value of assets | USD | $10,000 – $1M+ |
| Discount Factor | Liquidation adjustment | % | 20% – 75% |
| Disposable Income | Income minus necessary expenses | USD/mo | $0 – $2,000 |
| Multiplier | Years of future income | Months | 36 – 60 |
Practical Examples (Real-World Use Cases)
Example 1: The Struggling Retailer
A borrower has a $200,000 debt. They have $2,000 in cash, no real estate equity, and $100 in monthly disposable income. The sba offer in compromise calculator would output: $2,000 (Cash) + ($100 × 60) = $8,000. In this case, the sba offer in compromise calculator shows a potential settlement for 4% of the debt because the recovery potential is so low.
Example 2: The Home-Owning Consultant
A borrower owes $150,000. They have a home worth $400,000 with a $350,000 mortgage. The sba offer in compromise calculator calculates equity at $50,000, then applies a discount. With $500 monthly disposable income, the sba offer in compromise calculator might suggest an offer of $40,000 (Equity NLV) + $30,000 (Income) = $70,000. Here, the sba offer in compromise calculator helps identify that a 46% settlement is likely required due to the asset value.
How to Use This sba offer in compromise calculator
Follow these steps to get the most accurate result from the sba offer in compromise calculator:
- Step 1: Gather your most recent bank statements and property appraisals for the sba offer in compromise calculator.
- Step 2: Calculate your “necessary” monthly expenses. The sba offer in compromise calculator relies on honest budgeting.
- Step 3: Input your total debt. Ensure the sba offer in compromise calculator includes all interest.
- Step 4: Adjust asset values. If your equipment is old, tell the sba offer in compromise calculator the lower liquidation value.
- Step 5: Review the primary result. This is the starting point for your negotiation with the lender or SBA.
Key Factors That Affect sba offer in compromise calculator Results
1. Discount Factors: The sba offer in compromise calculator uses 80% for real estate because the SBA knows it costs money to sell property. High transaction costs lower your offer.
2. Disposable Income: This is the most contested part of the sba offer in compromise calculator. If you spend too much on luxury, the SBA will increase your sba offer in compromise calculator result.
3. Statute of Limitations: While the sba offer in compromise calculator focuses on math, the legal ability to collect affects the risk profile.
4. Asset Valuation: A formal appraisal might differ from your sba offer in compromise calculator estimate, changing the NLV significantly.
5. Lien Priority: If a bank is ahead of the SBA, the sba offer in compromise calculator correctly zeros out the value for the SBA if there is no equity.
6. Full Disclosure: If the sba offer in compromise calculator is missing an asset, the entire OIC will be rejected for fraud.
Frequently Asked Questions (FAQ)
Can I settle for 10% with the sba offer in compromise calculator?
Yes, if the sba offer in compromise calculator shows that your assets and 5-year income potential only total 10% of the debt.
Does the sba offer in compromise calculator handle Treasury debt?
Yes, but once a loan moves to treasury cross-servicing, significant fees (up to 30%) are added, which the sba offer in compromise calculator must account for.
What is SBA Form 1150?
It is the official offer form. The sba offer in compromise calculator essentially prepares the data you need for the sba form 1150.
Will the SBA take my house?
The SBA rarely forecloses on a primary residence if there is no equity, which is why the sba offer in compromise calculator is vital to prove lack of value.
Can I use the sba offer in compromise calculator for a 504 loan?
Absolutely. The sba offer in compromise calculator works for both 7(a) and 504 loan types.
What if my income is zero?
If the sba offer in compromise calculator shows zero disposable income, your offer will be based solely on the NLV of your assets.
Does the calculator include litigation costs?
The sba offer in compromise calculator assumes the SBA will consider its own costs to sue you as a reason to accept your offer.
How long does the OIC process take?
While the sba offer in compromise calculator takes seconds, the actual sba debt settlement process takes 6-12 months.
Related Tools and Internal Resources
- sba debt settlement: A comprehensive guide on the negotiation phases.
- sba form 1150: Downloadable templates and instructions for your OIC package.
- sba oic guidelines: The official SOP 50 57 regulations.
- sba litigation: What happens if your offer in compromise is rejected.
- sba collection process: A timeline of from default to Treasury.
- treasury cross-servicing: Understanding the final stage of SBA debt collection.