An SBA loan or Small Business Administration loan is an excellent option to finance the purchase of a Florida business.
Typically, a business with a sound financial history and profitable history as documented by tax returns are candidates for a bank loan that are guaranteed by the SBA.
An SBA loan can be a win-win for buyer and seller. The latter receives the lion’s share if not all the price at close while the buyer is able to finance the purchase for a lower down payment for a longer term.
There are two primary SBA loans – 7A and 504 loans.
A 7A SBA loan is the most common and is used by a buyer of a Florida business to acquire the primary assets including inventory, working capital and goodwill. Goodwill is defined as the purchase price of the Florida business exceeding the underlying assets.
A 504 loan is used for real estate business purchases and long-term equipment. The typical term on this type of SBA loan is 20 years and is usually a fixed interest loan. Lately, interest rates have been hovering around 5% for a 504 and 7% for a 7A.
Both buyer and seller must qualify for an SBA loan. The buyer must have good credit and a history of business acumen. The seller must show that the business, as judged by tax returns, can generate enough income to allow the buyer to pay back the loan with a cushion for safety.
The potential downside of an SBA loan is that they can be complicated and require substantial paperwork.
It is a good idea to find a business broker like Truforte Business Group that has shepherded buyers and sellers alike for decades through the financing process.
Check out Truforte’s Financing page where you can find Florida businesses for sale that are SBA loan opportunities. There is also a calculator to determine the loan amount, interest APR, term years and loan payment amount.
If you are interested in buying a Florida business with an SBA loan, contact a Truforte associate by filling out the form below.