When looking at businesses you might want to buy you should
always keep in mind how you are going to finance the purchase of the business.
Most small businesses are purchased using bank lender financing in the form of
a small business SBA loan. This post discusses the Small Business Administration (SBA)
loans that are available and what are the general requirements to qualify for
an SBA loan. Keep in mind that specific banks may have slightly different
requirements but the main issues will be the same across all banks. The SBA
supports small business development centers throughout the U.S. which can
provide information about the SBA Loan process.
What is an SBA Loan? What are the SBA guidelines for small
business acquisition loans?
Commercial banks and the SBA agree to certain ground rules
whereby if the bank adheres to the SBA loan rules, guidelines and regulations
and makes a loan to a borrower under those rules, then the SBA will guarantee a
significant portion of the loan (up to 90% in some cases). This SBA loan
guarantee makes the loans very low risk for the banks and therefore the banks
have an incentive to make these loans to small business borrowers. Not all
banks participate in this program and it involves a lot of paperwork!
What do I need and what can I borrow?
