Credit Crunch and SBA Lending for Small Business Acquisitions
Despite the current credit crunch, well capitalized community banks still have money to lend for business acquisitions. The SBA 7(a) loan program is an excellent way for both bank and borrower to tread through this troubled business environment.
While many large financial institutions are licking their wounds from the mortgage mess and the credit market contraction, community banks who are well capitalized and who traditionally don’t participate in these arenas are still a viable source of funds for small business acquisitions.
Because SBA loans have features that reduce risk for banks, they are a valued tool for banks in this environment. And because they offer lower down payments and longer terms, the resulting lower monthly payments are attractive to borrowers.
The US Small Business Administration (SBA) enables private lenders to make loans that they ordinarily would not be able to make by guaranteeing that a portion of the loan proceeds will be repaid to the lender in the event of a default by the borrower. Among many other uses, the SBA 7(a) lending program is the primary vehicle through which small business acquisitions are financed.
Experienced and well-reputed business brokers / intermediaries will have a list of lending institutions with whom they have worked in the past and who are well-versed in getting deals done.
Buying a business can certainly be an emotional ride. It’s a time to work with deal makers and specialists who will help to minimize the stress and help everyone move forward toward the timely completion of the business sale.
Visit our full SBA Financing Article that outlines the process from start to finish. The SBA requires a “Personal Financial Statement” that is used to determine if applicants meet the criteria to receive an SBA Loan. You can review and download a copy here.