When it comes to purchasing a business, entrepreneurs often face significant financial challenges. However, with the Small Business Administration’s (SBA) loan program, acquiring an existing business has become more accessible than ever before. In this blog, we will explore the enhanced features of the SBA loan program, highlighting recent changes that make it easier and more advantageous for prospective buyers. From increased loan amounts to expanded financing options, these updates empower entrepreneurs to pursue their business acquisition dreams. The enhanced SBA loan program makes buying a business easier than ever and .there are many SBA lenders who are ready to lend money.
Increased Loan Amount: From $350,000 to $500,000:
Recognizing the need for greater financial support, the SBA has raised the small loan amount threshold from $350,000 to $500,000. This increase provides entrepreneurs with a higher borrowing capacity, enabling them to acquire more substantial businesses or invest in growth opportunities. However, it’s important to note that collateral is required for loans exceeding $500,000 if the loan has an unsecured portion.
Partial Change of Ownership Financing:
In response to the evolving needs of business buyers, the SBA now offers partial change of ownership financing. This means that entrepreneurs can acquire a portion of the business while the existing owner retains a stake. This arrangement allows for a smoother transition and often facilitates better business continuity. It offers buyers the chance to leverage the experience and expertise of the previous owner while injecting their own vision and innovations.
Extended Seller Involvement with Flexible Equity Retention:
Under the updated SBA loan guidelines, sellers have the option to stay involved in the business for longer periods. If the seller retains equity of less than 20%, there is no guarantee requirement. However, if the seller retains more than 20% equity, they will need to guarantee the new buyer’s loan. This flexibility allows for a more seamless transition and the potential for a mutually beneficial relationship between the buyer and the seller.
Changes to Seller Debt Standby Periods:
Previously, sellers were required to remain on standby for up to 10 years. However, the SBA has now reduced this period to two years for what is considered “full standby.” This change provides sellers with greater freedom and flexibility to pursue other opportunities or enjoy the fruits of their labor. It also enables buyers to take full control of the business sooner, promoting independent decision-making and growth.
Expansion Loans: No Down Payment and Seller Financing:
The SBA loan program has expanded its support for entrepreneurs seeking to buy a business in the same NAICS code and region. In such cases, buyers now enjoy the benefit of no down payment and can leverage seller financing. This update opens doors for ambitious entrepreneurs to expand their existing business empire or venture into new territories, stimulating economic growth and innovation.
The enhanced SBA loan program has transformed the landscape of business acquisition, making it more accessible, flexible, and advantageous for aspiring entrepreneurs. With increased loan amounts, partial change of ownership financing, extended seller involvement, revised seller debt standby periods, and expansion loan benefits, the SBA loan program caters to the diverse needs of business buyers. These changes empower entrepreneurs to pursue their dreams, expand their businesses, and contribute to the thriving small business ecosystem. If you’re considering buying a business, exploring the updated SBA loan program should be a top priority to unlock new possibilities and propel your entrepreneurial journey forward. To view the top business opportunities many the the SBA lender pre-qualified Florida businesses for sale can be found right here at Truforte Business Group.
For more information on SBA loans learn all about selling a business when there is an existing SBA loan.