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The SBA has announced they are ending the special program put
into place as a result of the 2009 Recovery Act (March 16,
2009). This program waived the SBA fees and also increased
the SBA guarantee amount from 75% to 90%. There is a
transition period that is fully explained on our website at
http://www.keatepartners.com/News.htm
SBA Financing for Acquisitions & Available Programs
Most bank loans of $2,000,000 or less used in financing the
purchase of a business are SBA guaranteed. For the borrower,
there is little difference in applying for a conventional loan
and having the loan SBA guaranteed (there is a difference in
rates, amortization period and fees). Most banks will want
to have the loan SBA guaranteed as it reduces their risk in
lending. There is minimal delay in the loan processing by
having the SBA guarantee. There are two primary SBA Loan
programs: the 7(A) and the 504.
The 7(a) Loan Guaranty Program is the SBA’s primary loan
program. It is also the most flexible, since the agency can
guarantee financing under the program for a variety of general
business purposes. The maximum size loan that the SBA can
guarantee is $2 million. Typically the borrower will have to put
in 15-25% equity.
A start-up or existing business may use the proceeds of a 7(a)
guaranteed loan to:
• Expand or renovate facilities;
• Purchase machinery, equipment, fixtures and leasehold
improvements;
• Finance receivables and augment working capital;
• Refinance existing debt (under some circumstances);
• Finance seasonal lines of credit;
• Construct commercial buildings; and/or
• Purchase land or buildings.
The 504 Program provides growing businesses with
long-term (up to 25 years), fixed-rate financing for major fixed
assets, such as land and buildings. Typically the borrower may
only have to put in 10% as equity.
Proceeds from 504 loans must be used for fixed-asset projects
such as:
• Purchasing land and improvements, including existing
buildings, grading, street improvements,
utilities, parking lots and landscaping;
• Constructing, modernizing, renovating or converting existing
facilities; and
• Purchasing machinery and equipment.
There are a number of special purpose loan programs that are
also available. For detailed information visit the SBA
website at:
http://www.sba.gov/index.html
We assist buyers in obtaining financing. Even in the
current economic environment, we have had no problem in getting
acquisitions financed.
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