GOOD NEWS! SBA Lending Requirements are Easing!
The SBA (Small Business Administration) has released the 2018 Business Lending Guidelines.
It looks like the Government, and the SBA Lending Requirements are finally turning more “business-friendly” and SBA lending guidelines are easing.
Here is a link to download the 10 page document if you feel like torturing yourself through a bit of “Dry” reading on SBA Lending Guidelines.
DOWNLOAD DOCUMENT HERE
The Biggest Changes Can Be Found On Page 6
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Here is a “Break-Down/ Translation” of SBA Lending Highlights ….
1: Start-Up Businesses: “At a minimum, SBA requires an equity injection (borrower contribution) of no less than ten (10) percent of the total project costs for a start-up business.”
Translation: You need a minimum of 10% of the TOTAL project cost out of your pocket.
2: Buying of an Existing Business: “SBA requires an equity injection of no less than 10 percent of total project costs. Seller debt may not be used to meet this requirement unless it is on full standby for the life of the SBA loan.”
Translation: There is no such thing as No Money Down – 100% financing to buy a business with SBA financing. Contrary to the “Snake-Oil” salesmen out there, there is no such thing as 100% financing – you’re REQUIRED to have a little “Skin-in-the-game.” You need to have a minimum of 10% out of your pocket.
(This is a great opportunity).
3: Change of Ownership between existing owners (“partner buyout”): The pro-forma equity position after the change of ownership must be at least 10 percent of the total assets. Otherwise, the remaining owner(s) must provide an additional equity injection that will result in no less than a 10 percent net worth of total assets.
Translation: If you’re buying out a partner, you need to have a MINIMUM of 10% “skin-in-the-game.”
4: Removed the requirement for 25% equity injection when intangibles exceed $500,000in change of ownership loans in order to process under a Lender’s delegated authority.
Translation: This is GREAT News! You don’t need as much money or equity to buy the “Good-Will” value of the business.
5: Clarified that Lenders must consider seller debt as debt in all applications, including debt refinance and change of ownership.
Translation: ANY debt on the purchase of a business is considered and weighed against the DSCR. (Debt Service Coverage Ratio).
Synopsis: This is WONDERFUL News for Small Business!
With SBA Lending requirements easing, the banks will begin lending money again, and I fully expect this will spark a MASSIVE increase in expansion and business sales.
- If you’re looking to buy a business, Money will be easier to get.
- If you’re looking to EXPAND your business organically or by “Rolling-Up” competitors, Money will be easier to get.
Personal Prediction: Small Businesses have been struggling to survive for the past 10 years, and there are a LOT of baby-boomer business owners looking to retire.
With the resurgence of the American economy, SBA Lending requirements easing, and the “Business Friendly” attitude of Washington, 2018 will kick off what might very well be the largest transfer of assets and business sales the world has ever seen.
NOW IS THE TIME to take action –
If you want to sell, get your paperwork in order and call a Business Broker TODAY.
>>>> Call Me! <<<<
If you want to buy, get in while the getting’ is good – because easier lending from banks will lead to higher selling prices!