Purpose and Usage
Business Acquisitions: SBA 7(a) loans can be used specifically for acquiring businesses.
Loan Types
Standard 7(a) loans: Up to $5 million for various needs related to business acquisitions.
Loan Amounts and Guarantees
Guarantee Percentage: Typically, 90%, reducing lender risk.
Interest Rates and Fees
Interest Rates: Prime rate plus a spread, currently ranging from 9.75% to 11.74%.
Fees: Guarantee, packaging, and servicing fees may apply.
Repayment Terms
Terms: Up to 25 years for real estate purchases, 10 years for equipment and working capital.
Monthly Payments: Fixed-rate principal and interest.
Eligibility Criteria for Purchasers
Experience: Two years of business experience.
Credit Score: Typically 680 or higher.
Down Payment: Banks now require only 10% down payment from the purchaser. If the Purchaser has Direct Business Experience this can be reduced up to 0% down in coordination with a seller note.
Application Process
Find an SBA-Approved Lender: Utilize Sterling Business Capital to identify a lender interested for your SBA 7(a) loan.
Documentation: Gather necessary documents such as SBA Form 1919, financial statements, and tax returns.
Conclusion
SBA 7(a) Acquisition Loans are valuable for entrepreneurs and businesses looking to acquire other businesses, with reduced down payment requirements making acquisitions more attainable. Understanding eligibility, terms, and the application process can help individuals secure the funding needed for successful acquisitions.