What are the Approval Measures for SBA Loans?

When buying a business, your business broker San Diego will make you aware of the SBA loans. This is the government backed option of financing business acquisition. SBA is an abbreviation for Small Business Administration. With this option, you will get funds at an interest rate of between 5.5% and 8%. The SBA loans are very popular today because of the low interest rates and because banks are cutting back on small business lending.

All in all, it is good to note that uncertainties on the approval processes are what keep most small businesses from applying for the SBA loan. In this post we shall be looking at the two main considerations that are made to determine approval for the SBA loan.

Terminology
When considering the SBA loan, it is good to note that this loan doesn’t come directly to the small business. The SBA loan partially guarantees loans against nonpayment. The loan is not sent directly to you. This is a very important distinction you need to remember when your business brokers San Diego recommend the SBA loan. You should also remember that there are two approvals that take place: by the bank/financial institution and by the SBA on the loan guarantee. The standards set for bank approval are higher than those by the SBA. This is because the bank will have a risk on the part of the loan that is not guaranteed by the SBA.

Approval qualifications

Personal credit for the business owner

When applying for the SBA loan to help you purchase a business, you must have a good credit score. The required credit score is at least 650 or 700 in order for you to be approved. The reason you need a great credit score is because both the SBA and the financial institution want you to demonstrate your financial responsibility in paying debts. SBA loans have personal guarantee requirements because they will have to pay the loan if you are unable to pay. As a result of this, your creditworthiness is a vital consideration.

Ability to generate cash flow to cover the loan payments

To be approved for the SBA loan, your annual compensation and business profits must be at least 1.25 higher than the annual loan payments. Banks don’t want you to default on loans. To guarantee this they will review your business’ financial history to ensure you will have the finances to cover loan payments.

If you are getting an SBA loan to buy a business, your business broker San Diego will help you better prepare for the application and ensure that you qualify. The broker will also help with the process since applying for an SBA loan is much more complicated than getting a loan from the bank.

Business Broker San Diego

What Client’s Say

We Couldn’t Be Happier

"When we thought about selling we had no idea what our business was worth or how to go about selling. What you were able to do was to cut through the fog so that we understood the valuation issue and had a comfort level with the process. As you know we ended up selling for somewhat more than the original valuation and we got all cash and our CPA loved the way our tax liability was minimized. We couldn’t be happier!"

Over $250,000 More

"Our first contact with you shocked us when you suggested that we wait 18 months before selling because you believed that if we hit our projections that the value would be significantly greater. As it turned out we not only followed your advice but also got slightly over $250,000 more than we originally had hoped for. It is seldom that we have had the opportunity to deal with a firm that doesn’t want both money and a commitment NOW. It was clear and obvious that you had our best interests at heart."

You Got the Valuation We Agreed On

"You did a great job on the sale of our business in really beating the bushes for buyers, including a UK company that was an active suitor. You managed to get the valuation that we had all agreed upon and got it substantially all in cash and got the transaction closed with little to no problems or expensive lawyers involved."

Thank You for Handling Our Business

"Our business was smaller than what your firm normally handles but it was a BIG part of our net worth and savings. Thank you for handling our business and we were very pleased and delighted with the results."

More Than Anticipated

"Our transaction was involved as we had different corporate entities located in different states. Our only regret is that we didn’t retain your services before 2012 when we paid $25,000 to a firm in Texas that did a valuation and market analysis for us before then failing to do anything in the way of trying to sell our business. You got it sold for more than anticipated."

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