Sba Offer In Compromise Calculator

Calculate your estimated SBA debt settlement offer based on liquidation value and future income.

Net Realizable Equity (Home):
$56,000

Total Asset Component:
$71,000

Future Income Component:
$30,000

The Formula: Settlement Offer = (Liquid Assets) + (Net Equity × 80% Liquidation Factor) + (Monthly Disposable Income × Calculation Months).

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What is sba offer in compromise calculator?

The sba offer in compromise calculator is a specialized financial tool designed to help small business owners estimate the amount the Small Business Administration (SBA) might accept to settle a defaulted loan. When a business fails and the collateral is liquidated, a “deficiency balance” remains. An Offer in Compromise (OIC) is the formal process of proposing a one-time payment to satisfy that remaining debt for less than the full balance owed.

This sba offer in compromise calculator is essential for borrowers facing the SBA Form 1150 process. It focuses on two primary pillars: your net realizable asset value and your projected future income. Who should use it? Primarily individuals whose businesses have closed, assets have been sold, and who now face personal guarantee liabilities they cannot afford to pay in full.

A common misconception is that the sba offer in compromise calculator will result in an automatic approval. In reality, the SBA and your lending bank review these figures against strict “ability to pay” standards. The calculator provides a logical baseline for negotiations, but transparency regarding your financial hardship is equally vital for a successful settlement.

sba offer in compromise calculator Formula and Mathematical Explanation

The mathematical logic behind the sba offer in compromise calculator relies on the principle of “Present Value of Recovery.” The SBA wants to know if taking a cash settlement now is better than attempting to garnish wages or seize assets over the next several years. The formula breaks down as follows:

Variable	Meaning	Unit	Typical Range
NRV	Net Realizable Value of Assets	Currency ($)	75% – 80% of Market Value
MDI	Monthly Disposable Income	Currency ($)	$100 – $2,000
N	Income Multiplier (Months)	Time (Months)	12 – 60 Months
LIQ	Liquidation Discount	Percentage (%)	20% Reduction

Step-by-step derivation: First, the sba offer in compromise calculator determines your home equity by subtracting the mortgage from the fair market value. Then, it applies a 20% “quick sale” discount to simulate a forced liquidation. Finally, it adds your cash on hand and your disposable income multiplied by the selected timeframe to reach the final settlement estimate.

Practical Examples (Real-World Use Cases)

Scenario	Inputs	Calculated Result	Interpretation
Closed Retail Shop	$2k Cash, $20k Equity, $200 Income	$30,000	A realistic offer for a borrower with low surplus income.
Professional Services	$10k Cash, $50k Equity, $800 Income	$98,000	Higher settlement required due to significant earning capacity.

In the first example, the sba offer in compromise calculator shows that with a low disposable income, the SBA is more likely to accept a smaller lump sum because the “cost of collection” over time would be inefficient. In the second case, the higher income makes a larger settlement necessary to match what the SBA could potentially collect through long-term litigation.

How to Use This sba offer in compromise calculator

Step	Action	Detail
1	Enter Asset Values	Input your current bank balances and market value of real estate.
2	Subtract Liabilities	Input your mortgage balance precisely to determine net equity.
3	Define Disposable Income	Be honest about necessary living expenses vs. total household income.
4	Select Timeframe	Choose 60 months for the most conservative SBA-aligned estimate.
5	Review Composition	Look at the chart to see if your offer is asset-heavy or income-heavy.

Key Factors That Affect sba offer in compromise calculator Results

Factor	Financial Reasoning
Liquidation Costs	SBA deducts roughly 20% from market value for legal and brokerage fees.
Earning Capacity	Younger borrowers with high degrees may face higher income multipliers.
Asset Multiplicity	More assets often lead to a higher “floor” for acceptable offers.
Health & Age	Hardship cases (illness/retirement) can justify lower income components.
Local Market Trends	Depressed real estate markets can lower the NRV in the calculator.
Previous Payments	A history of good faith payments can sometimes influence reviewer leniency.

Frequently Asked Questions (FAQ)

Will the sba offer in compromise calculator guarantee a settlement?

No, the sba offer in compromise calculator provides an estimate based on standard SBA guidelines, but individual bank officers have discretion.

What is a “Quick Sale Value” in the calculator?

It is usually 80% of the fair market value, representing what an asset would sell for in a 60-90 day window.

Can I settle if my business is still open?

Generally, no. The SBA requires the business to be closed and all business assets liquidated before an OIC is considered.

How does disposable income affect the sba offer in compromise calculator?

Every dollar of monthly surplus is usually multiplied by 60 to determine the income portion of your offer.

Does the SBA look at my spouse’s assets?

If the spouse did not sign a personal guarantee, their separate assets may be excluded, though household income is considered.

What happens if my offer is too low?

The SBA will issue a counter-offer or a denial letter outlining why they believe you can pay more.

Is the settlement amount taxable?

The IRS may consider forgiven debt as taxable income. Consult a tax professional regarding Form 1099-C.

Can I use retirement accounts in the calculator?

ERISA-qualified retirement accounts are often protected and might be excluded from the asset calculation.