Business Acquisitions: SBA 7(a) loans can be used specifically for acquiring businesses, making them a versatile financing option for entrepreneurs and business owners looking to expand through acquisition.
Standard 7(a) Loans: Up to $5 million for various needs related to business acquisitions, including partner buyouts and strategic acquisitions.
Guarantee Percentage:Â The SBA now guarantees up to 90% of the loan, significantly reducing the risk for lenders and making it easier for borrowers to secure funding.
Interest Rates: The interest rates for SBA 7(a) loans are typically the prime rate plus a spread. As of 2024, these rates range from approximately 9.75% to 11.74%, depending on the lender and the specific loan terms.
Fees: Guarantee fees are waived for loans of $1 million or less until September 30, 2024. For loans between $1 million and $2 million, the guarantee fees are discounted.
Terms: Up to 25 years for real estate purchases and up to 10 years for equipment and working capital.
Monthly Payments: Generally fixed-rate principal and interest payments, which can provide predictable and manageable repayment plans for borrowers.
Experience: At least two years of business experience.
Credit Score: Typically, a minimum credit score of 680 is required.
Down Payment: Traditionally, a down payment of around 10% is required. However, 100% financing with no down payment is possible in specific scenarios such as partner and family buyouts, as well as strategic business acquisitions.
Seller Notes: Seller owner notes can be used as equity, providing more flexibility in financing structures​.
Find an SBA-Approved Lender: Utilize Sterling Business Capital or other resources to identify a lender experienced in SBA 7(a) loans.
Documentation: Gather necessary documents such as SBA Form 1919, financial statements, tax returns, and other relevant financial documentation.
Timeline: Under normal circumstances, the loan process can be completed in as little as 45 days, thanks to recent streamlining efforts by the SBA.
SBA 7(a) Acquisition Loans are a valuable tool for entrepreneurs and businesses looking to acquire other businesses, with updated requirements and streamlined processes making acquisitions more attainable. Understanding the latest eligibility criteria, terms, and the application process can help individuals secure the necessary funding for successful acquisitions. For more details and to get started contact Sterling Business Capital LLC.
