SBA 7(a) for a business acquisition: what the process actually demands

The SBA 7(a) programme guarantees a portion of a loan made by a participating lender, which lets lenders finance acquisitions they would otherwise decline. For small business purchases it is the default route. What to expect. A down payment from the buyer, with part of the balance sometimes satisfied by seller financing on standby terms the lender approves. A personal guarantee from owners above a threshold. A lien on available collateral, which for a buyer who owns a home commonly includes it. An independent business valuation ordered by the lender. And a timeline measured in months, not weeks, which has to be written into the purchase agreement. The underwriting looks at the business's historical cash flow covering the new debt with margin, plus the buyer's relevant experience. A buyer with no background in the industry is a harder file regardless of the numbers. Eligibility rules catch people: the business must be for-profit and operating in the US, certain industries are excluded, and the seller generally cannot stay on as an owner, though a consulting or transition agreement for a limited period is usual. Preparation that shortens the process: three years of business tax returns and financial statements, interim statements, a lease or landlord commitment for the premises, and a written transition plan. Lenders vary a great deal in how efficiently they run these, and choosing a lender that does them constantly is worth more than a small difference in rate. This article is general information, not legal, tax or financial advice. Rules change and every deal is different — check your own case with a licensed professional. Alberto Zaltzberg — Adonait · adonait.com