Deciding whether to pursue an ERC buyout requires careful consideration of your specific situation. There's no universal right answer , what works for one business might not make sense for another.
Understanding the Current IRS Landscape
The IRS is currently processing ERC refunds significantly slower than originally anticipated. While initial estimates suggested 6-9 months, many businesses are now experiencing years of delay
This backlog stems from increased scrutiny of ERC claims following widespread fraud concerns. The IRS is taking extra time to verify eligibility and calculation accuracy, even for legitimate claims.
Understanding this timeline is crucial to your decision.
When ERC Buyouts Make Sense
Several scenarios make buyouts particularly valuable for businesses:
Immediate Capital Needs: If you have time-sensitive opportunities, equipment purchases, expansion plans, inventory needs, waiting over a year might mean missing critical windows. Having cash now versus later can sometimes make the difference between growth and stagnation.
Cash Flow Pressure: Businesses operating on tight margins may struggle to maintain operations while waiting for substantial refunds. If that ERC money would alleviate financial stress or help you avoid more expensive financing options, a buyout might be worthwhile.
Risk Transfer Preference: Some business owners simply don’t want to deal with potential IRS audits, documentation requests, or compliance concerns. Transferring that responsibility to the buyout company provides peace of mind.
Financial Planning Certainty: Having a definite funding date helps with business planning. Instead of wondering when the IRS will pay, you know exactly when capital will arrive.
When Waiting Makes More Sense
Conversely, some situations favor patience:
Strong Cash Position: If your business has healthy cash flow and reserves, waiting for 100% of your refund rather than accepting 85-90% might be the financially optimal choice.
Lower Refund Amounts: If your ERC claim is relatively small – say $50,000 or less – the difference between waiting and accepting a buyout might not justify the complexity of the transaction.
Uncertain Claim Status: If there are questions about your ERC eligibility or calculation accuracy, resolving those with the IRS first might be smarter than selling a potentially problematic claim.
Conservative Financial Approach: Some business owners prefer not to “sell” future receivables as a matter of principle, even when it might be financially reasonable.
Key Questions to Ask Yourself
Before deciding, work through these questions honestly:
- What would immediate access to 70-85% of my ERC value enable for my business?
- What’s my risk tolerance for dealing with potential IRS inquiries?
- Have I compared the cost of a buyout to other financing options?
- What does my accountant or financial advisor recommend?
The Role of Professional Advice
This decision shouldn’t be made in isolation. Your tax advisor can explain the accounting and tax implications of a buyout transaction. Your attorney can review the purchase agreement for unfavorable terms or risks. Your financial advisor can help model how immediate capital affects your business trajectory versus waiting.
At minimum, have a qualified professional review any buyout agreement before signing.
Making Your Decision
There’s no shame in choosing either path. Waiting for your full refund is perfectly legitimate if your business can afford to do so. Pursuing a buyout is equally valid if immediate capital serves your business goals.
The key is making an informed choice based on your unique circumstances, not pressure or fear of missing out.
At OBC Fund, we believe in helping business owners understand their options clearly so they can make confident decisions. Whether an ERC buyout aligns with your needs or not, knowing your choices puts you in control.
Take time to evaluate your situation thoroughly, consult with trusted advisors, and choose the path that best serves your business’s long-term success.