Buying a Business with an SBA Loan
Are you thinking about buying a business? Maybe, you have already found a business to buy or maybe you are just starting to think about jumping into the path of entrepreneurship or small business ownership. In either case, buying a business with an SBA loan is one of the easiest and smartest options out there. Buying a business gives you traction and a business model to run with and can often be easier than starting a business from scratch.
As a business appraiser, Peak Business Valuation works with dozens of business buyers each week. Buying a business is an exciting and daunting process, but we are here to help! One of the largest hurdles of buying a business is knowing how to finance it. With a variety of financing options out there, we recommend first seeking SBA financing to buy a business.
Below we detail what an SBA loan is, what types of financing the SBA offers, the advantages of buying a business with an SBA loan, and when a business appraisal is needed for SBA financing. For questions, reach out by clicking the link below to schedule your free consultation. Peak Business Valuation, business appraiser, is happy to answer any questions you have about buying a business and SBA financing.
What is an SBA Loan or SBA Financing?
An SBA loan or SBA financing is a form of government lending directly benefiting small businesses. The SBA stands for the U.S. Small Business Administration. SBA loans or SBA financing is obtained through approved SBA lending partners not directly from the SBA. SBA lenders love providing SBA loans because they are government-backed meaning the government guarantees a portion of the loan. This reduces the risk for the lender. As such, the SBA works with a network of approved financial institutions to lend SBA loans to small businesses. For more information, see Finding an SBA Lender and Choosing an SBA Lender.
SBA Financing for Buying a Business
When you buy a business there are a variety of things you may be looking at needing to finance. Some of these can include:
- Buying the business itself
- Purchasing commercial real estate
- Financing equipment
- Financing a franchise
- Refinancing business debt
- Buying out a partner in the business
If you are buying a business and need financing for any of the above options, an SBA loan may be the perfect fit for you.
Advantages of Financing a Business with an SBA Loan
When you are considering buying a business with an SBA loan there are many benefits. One of the best reasons to finance a business with an SBA loan is that your down payment can be as little as 10 percent. For most individuals, this makes it very affordable to buy a business using an SBA loan.
For instance, say you have $65,000 in cash to use for the down payment to buy a business. With an SBA loan, this means you could buy a business for $650,000 or more depending on how you structure the transaction. Negotiating the purchase price and structuring the business transaction right can help to ensure you get the most for your money. As a business buyer, SBA financing can increase your purchasing power.
Another reason to finance a business with an SBA loan is their competitive rates and term lengths. SBA financing makes it very easy for you to get the best terms possible when financing a business purchase. The SBA lender will explain all the terms when you apply for SBA financing. For more information, read Advantages of SBA Loans.
As a business appraiser, Peak Business Valuation is here to help you! Not only can we connect you with an SBA lender but we can also provide the lender with an SBA business valuation. We work with over 100 SBA lenders across the country. As such, our SBA lender matching process can help ensure you connect with the best SBA lender for your business needs. Schedule your free consultation today to learn more!
When do you need a business appraisal for an SBA loan?
As you start the SBA loan process, often the lender will require a business appraisal of the business. The SBA is required to obtain an SBA business valuation or SBA business appraisal from a third-party business appraiser if the loan amount is over $250,000.
If you are buying a business and seeking SBA financing, often the SBA lender can pre-order the SBA business appraisal from Peak Business Valuation. This enables the business buyer to strategically perform due diligence and negotiate a fair purchase price before securing SBA financing. Obtaining a business appraisal when buying a business is one of the most important steps you can take to successfully close a business purchase. Read Business Appraisal for Buying a Business for additional information.
Summary
If you are planning to buy a business, an SBA loan should be one of the first financing options to consider. With many advantages, buying a business with an SBA loan should be one of the first things to look into. Buying a business is an exciting time. Through proper due diligence, you can help ensure you buy a business that is a good fit for your interests, budget, and goals.
Peak Business Valuation, business appraiser, is happy to help you with the process of buying a business. Whether that help comes with connecting you to an SBA lender or providing you with a business appraisal for buying a business. We love working with business buyers to help them confidently and successfully buy a small business. Please reach out with any questions by scheduling a consultation! See also our page on Can I get an SBA Loan to Buy I Business?
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