The business of acquiring businesses is booming right now. A report from BizBuySell states that the number of businesses changing hands hit a record high in 2018.
However, along with this jump in sales, the cost of buying a business is also rising. Most small business buyers will need a loan, and one type of loan that is available to them is an SBA loan.
Small Business Administration (SBA) Loan
The SBA makes access to business loans easier with its loan guarantee program. In recognition of the growth in business acquisitions, effective on January 1, 2018, the SBA made a number of changes to the standard operating procedure of its popular SBA 7(a) loan program. These changes include the following:
- Easing the equity rules for an acquisition loan – The amount of required equity is reduced from 20-25% to only 10%. A bank can now finance 90% of the transaction providing 5% of buyer equity is in the form of cash and 5% is from a seller note. This effectively opens up acquisition loans to a broader audience.
- Extending the seller standby requirement to the full term of the loan.
- The provision of a new SBA franchise directory listing franchises that are eligible for SBA financial assistance.
Even So, Not Everyone Will Qualify for an SBA Loan
Although these SBA changes are welcome and do away with some of the red tape associated with an SBA loan, the parameters for obtaining an SBA loan are still fairly restricting. Innovative lenders are aware of these difficulties and are taking big steps to assist entrepreneurs looking to buy a business. If you fall into this category, there has never been a better time to find the financing you need. If you are looking for an SBA loan for your already established business or you want to buy a business or a franchise, look no further than Bear River Financial. Set up a consultation with us today to see how we can help you.