If you are considering buying a business for the first time or purchasing an additional business, you probably need a business acquisition loan to make that happen. With the increasing number of requests for business acquisition loans, the Small Business Administration (SBA) has made some changes to its lending programs to keep up with demand.
Changes to the SBA 7 (a) Loan
The 7(a) loan is the standard and flagship loan program offered by the SBA. The organization made several significant changes to this program that went into effect on January 1, 2018. The purpose was to make it easier for small business owners to access business acquisition loans as well as to qualify for them.
The first change the SBA made to the 7(a) loan was equity requirements. Before 2018, small business owners had to have between 20 and 25 percent equity in their company to qualify for the loan. The equity requirement is now just 10 percent. If approved for a business acquisition loan at 10 percent equity, the lender will finance 90 percent of the loan. However, you must present your equity share as five percent cash and five percent seller note.
Another change the SBA has made is to extend the existing seller standby rule to cover the entire life of the loan. It has also published a franchise directory of SBA-backed lenders that states which franchises meet eligibility for financial assistance from the SBA.
The changes come after complaints from borrowers about too much red tape. The SBA also wanted to enlarge its range of borrowers to reflect greater diversity. With these changes, more small business owners have the opportunity to qualify for a business acquisition loan and chase their own version of the American Dream.
Looking for SBA Loan Options or Other Types of Business Financing?
Topfund Capital is available to provide you with information about SBA loan programs as well as offer you alternative financing options. Please contact us today to learn more.