How To Buy A Business With The New SBA Loans, or Without. Buy that dream business now.

1. How to Buy a Business With the New SBA Loans
How to Buy a Business: Business Acquisition Financing - SBA Policy Changes
Effective Oct 1, 2009
SBA Business Acquisition Financing - SBA Policy Changes
Effective Oct 1, 2009
Intangibles Policy: - Change of ownership loans that include purchase of intangible
assets are allowed.
Intangible Asset Definition: - SBA Now defines “Intangible Assets” as including, but
not limited to, goodwill, client/customer lists, patents, copyrights, trademarks and
agreements not to compete.
Purchase Price of Intangibles over $500,000: - If purchase price includes intangible
assets in excess of $500,000 then, Borrower and/or seller must provide an equity
injection of at least 25% of the purchase price of the business.
Purchase Price of Intangible less than $500,000: - If purchase price of business
includes less than $500,000 for intangibles, the 25% equity requirement does not
apply.
Seller Equity: - Seller Equity = Seller-take back financing that is on full stand-by (no
payments of principal or interest) for at least 2 years. Borrower and seller will agree
how much equity each will provide Ex: borrower may provide 10%; seller may
provide 15% total must equal at least 25%.
Buyer’s Down Payment: - Cash that is borrowed; SBA considers funds borrowed
through the use of personal credit for injection (Ex: Home Equity Loans) into the
business as additional debt, not equity, with one exception. If the Small Business
Applicant can demonstrate repayment of this personal loan from sources other than
the cash flow of the business, the cash injection may be considered equity.
Business Valuations: - If the amount being financed (including any 7(a), 504, seller,
or other financing minus the appraised value of real estate and/or equipment being
financed is $250,000 or less, the lender may perform its own valuation of the
business being sold. If the amount being financed minus the appraised value of real
estate and/or equipment is greater than $250,000 or if there is a close relationship
between the buyer and seller, the lender must obtain an independent business
valuation from a qualified source.
Loan Terms: Business acquisitions with no real estate remain at a 10 year term. Real
estate acquisitions remain at a 25 year term. Historically, loans that included both
business and real estate were blended. Lender’s now have the option of providing a
blended maturity or a maturity based on the maximum maturity allowed for the
asset comprising the largest portion of the use of loan proceeds. For example, if the
majority of loan proceeds are financing real estate, a maximum term of 25 years is
allowed. Verify with the lender what method will be used to determine the maturity.

2. Collateral: SBA no longer allows lenders to provide a value to accounts receivable
and inventory when determining collateral coverage, even if those assets are
required as collateral on term loans.
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