Picture this: You’ve found the perfect business to acquire—a thriving operation with established customers, a solid reputation, and room for growth. But there’s one hurdle in the way: securing the funding to make it happen.
Enter Small Business Administration (SBA) loans: powerful and flexible financing tools that many entrepreneurs rely on to fund business acquisitions. Whether you’re looking to expand your portfolio or become a first-time business owner, the right funding can be the difference between a smooth transition and a missed opportunity.
Here’s a look at how SBA loans can finance your next steps.
Why Choose SBA Loans for Business Acquisitions?
SBA loans are specifically designed to help small business owners looking to explore options other than traditional financing. They offer favorable terms that make acquisitions more accessible, particularly when purchasing an established business with significant upfront costs.
There are three key reasons why SBA loans are ideal for business acquisitions:
- Lower Down Payments: SBA loans typically require a smaller down payment than conventional loans, making it easier to preserve working capital during an acquisition to invest in growth and operations post-acquisition.
- Extended Repayment Terms: With terms of up to 10 years for non-real estate and up to 25 years for real estate, SBA loans offer the flexibility to manage cash flow without the pressure of meeting short-term repayment deadlines, found in conventional 5-year terms. This is especially helpful for taking on a new business with evolving financial demands.
- No Balloon Payments: Fully amortizing loans with no need to refinance.
Financing with an SBA 7(a) Loan for Business Acquisition
The most common SBA loan, is the SBA 7(a) Loan, a versatile option that can be used for a wide range of business needs, including acquisitions. With loan amounts up to $5 million and terms up to 25 years for real estate and 10 years for non-real estate debt, this option is ideal for those seeking to acquire a well-established business with solid cash flow.
Benefits of financing with an SBA 7(a) Loan include: flexible use of funds, lower down payments (typically 10% – 15% of the purchase price), longer amortization which allows for lower loan payments without future balloon payments, the ability to include closing costs with the loan and the ability to find non-collateral dependent loans with both variable and fixed-rate options.
Securing an SBA Loan for Business Acquisition
Securing an SBA loan doesn’t have to be daunting. Here’s a streamlined approach to getting started:
- Conduct Thorough Due Diligence: Make sure you understand the financial health of the business you’re looking to purchase. Lenders will examine the company’s cash flow, assets, liabilities, and overall market position.
- Consult with an SBA-Preferred Lender: As an SBA-preferred lender, Byline Bank is here to help business owners navigate the SBA loan process and work through the application, from gathering financial documents to structuring the loan for success.
- Submit Your Loan Application: After working with your lender to gather the necessary documentation, it’s time to submit your loan application. Working with an experienced SBA lender, the initial review should only take a few days to determine if the deal will be accepted to be submitted to the SBA for approval.
How Byline Bank Can Help
Byline Bank recognizes that small businesses are the backbones of communities with unique challenges that require creative financial solutions. As specialists in SBA lending, Byline offers a personal approach to business acquisitions and has a proven track record of helping business owners succeed.
Our team understands the nuances of SBA loans and can tailor financing options to meet your unique needs. Whether you’re purchasing a new business, expanding your existing business, or acquiring a competitor, Byline Bank’s SBA lending team is ready to support your next big move.
Acquiring a business is a major step, but with the right financing in place, it can be a smooth and rewarding process. SBA loans provide the flexibility, terms, and support that many business owners need to secure funding for acquisitions. With Byline Bank’s expertise and SBA loan options, you’re one step closer to making your business ownership dreams a reality. Get in touch with our SBA loan specialists today!
