SBA Loan Financing
SBA Loan Financing
SBA Financing is often available for the purchase of a small-midsize business and the real estate associated with it. SBA financing (U.S. Small Business Administration), is generally the least expensive and often the only financing available for the acquisition of small to midsize businesses. In fact, as professional business brokers, SBA financing is our preferred transaction financing structure. Our typical deal structure with SBA financing is a 10% to 15% buyer down payment, with 75% to as much as 90% SBA financing, and in some instances a Seller Note of 10% of the transaction value.
The SBA itself does not provide business financing (loans) and acts as the guarantor to approved SBA lenders (banks). The SBA will guarantee up to 75% of the financing for qualifying businesses and buyers. Total Business Brokers works exclusively with SBA PLP (Preferred Lender Program) banks. As Business Brokers with over 20 years of experience in SBA-financed business acquisitions, we have long-term relationships with the top SBA lenders offering the best rates and with the best record of successfully closing transactions.
Some common misconceptions about SBA financing are that is it nearly impossible to obtain and it takes months. In fact, Total Business Brokers uses SBA financing for 90% of our transactions, and we often close SBA-financed transactions within 60 to 90 days from offer acceptance.
SBA Financing Terms
- SBA financing for business acquisitions has a maximum loan value of $5 million. You can have multiple SBA loans so long as the total loan value is less than $5 million.
- Minimum Buyer Down Payment is 10%, some banks may require 15% depending on the buyer’s qualifications. (note this is a cash down payment and funds must come from the buyer).
- SBA Interest rate of Prime + 3.0% (max set by the SBA), as of January 2024 most banks’ SBA loan rate is between 9.5% and 10.5%, the current maximum SBA lending rate is 11.5%. We have one lender offers a 10-year fixed rate SBA 7a loans at 7.75% yo 8%.
- 10-year financing term.
- No prepayment penalty on SBA 7(a) loans.
- Collateral is required on most loans, typically a lien against your home or other assets (in some circumstances collateral can be waived, typically on small transactions).
