Are SBA Loans a big hassle?
They can be if you don’t work with the right lender. That’s why Complete Business Capital only works with experienced and flexible SBA loan partners. These loans are a great benefit for business owners, but too many lenders have problems with them. We solve that problem!
You may have heard that SBA loans require a lot of paperwork. It is really not much more than a regular bank loan, but more people qualify due to the government insurance. Additionally, you get 10 years to repay (25 years if the purchase involves real estate) resulting in lower monthly payments than the standard 5-year bank loan – so the paperwork is really worthwhile.
The secret to a successful SBA loan is working with the right lending partner to prepare. If you are ready to apply for an SBA business acquisition loan or have questions about the process, please contact us at Complete Business Capital. Our experts are happy to assist you.
Ready to Purchase a Business?
Many businesses are purchased with an SBA loan. This is actually a bank or private loan guaranteed by the Federal Government. As such, you and the business being purchased need to meet certain loan criteria. All business loans are based on an evaluation of the borrower’s Credit, Cash Flow (or cash on hand), and Collateral (the 3 Cs). How do you demonstrate your 3 Cs are strong so that the purchase looks like it is low risk to a lender? There are two parts:
Personal Strength (You and any Partners)
- Very Good Credit (close to 700 credit score or above)
- Your own Cash to invest (typically 10-25% of purchase price)
- The SBA requires a minimum of 10% cash investment from you/partners and it may NOT be borrowed. Anything additional can come from relatives, seller financing, etc.
- Collateral – ideally real estate, such as home or rental property equity, and/or strong assets of a business you already own
- Industry and Management Experience
- Additional sources of income outside the business that is being purchased (pension, spouse income, rental property income, existing business, etc.)
Strength of the Business Being Purchased
- Strong Cash Flow shown on 3 years of the Seller’s Business Tax Returns
- Profit on tax returns must be at least 1.2x greater than your expected annual loan payment. If it is not, the business is not strong enough to pay for the purchase.
- If the seller will not show you the tax returns, you will not be able to get a loan
- Collateral – ideally business real estate, otherwise, a strong balance sheet may work
In addition, here are some of the common requirements to determine if you will be eligible:
- Must be current on ALL taxes
- No bankruptcy in the past 3 years and no bankruptcy ever where the SBA lost money
- U.S. citizen or legal permanent resident
Other Uses for SBA Loans
SBA loans can be used for many purposes. For instance you can,
- Hire new workers
- Refinance high interest debt
- Buy new equipment
- Buy a business location
- And more!
Are you ready to see what your business can really do? Apply for an SBA loan to reach your full potential. If an SBA loan is not right for your business we will help find an alternative solution to get the financing your business needs. Contact us to get started today!