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Posted on June 18, 2009

Contributed by Jonathan Smith

Tips For Faster SBA Loan & Business Purchase Financing


The most common question clients ask me is how fast can we secure them funding.  While there are many steps we must pass through from start to finish my answer is “it’s all up to you.”  This statement often catches people off guard but it is the absolute truth.  There are certain items you must have ready in order to start presenting to lenders.  Your quest for financing will be much faster if you have the following items ready, preferably in electronic format:

*  Past 3 years personal tax returns for all owners with 20% or more ownership (Federal Returns only)

*  Personal Financial Statement (you can download one from the SBA website or call me for one)

*  For any other affiliate company with at least 20% ownership by an owner of applicant business you will need to provide the past 3 years corporate tax returns

*  Resume

*  Signed Purchase Agreement

*  Brief write-up about the business

*  Past 3 years corporate tax returns of the business you are purchasing

*  Past 3 years P&L and Balance Sheet of the business you are purchasing

*  Interim P&L and Balance Sheet of the business you are purchasing

*  Reason the current owner is selling

*  Minimum of your first 12 months projected P&L

If you have all of these items ready to go it will help get your transaction into underwriting much faster.  If you are in the early stages of searching for a business to buy then simply have your personal items available for review, once you have identified the business you desire we can then request the items needed from the seller.  A complete package is more likely to be put at the top of an underwriters pile whereas an incomplete package can drastically reduce your changes of funding altogether.

About The Author:  Jonathan Smith is a financing/loan broker, consultant who assists with larger loan amounts ($500K to $5M) - SBA loans, conventional financing, and private lenders for business purchase financing. We works with business buyers, owner/sellers, business brokers, and agents. For assistance with business purchase financing options phone him direct at 888-859-9838.

Watch for more blog posts / articles from me in the future!

See all contributions from Jonathan Smith

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Comments:

Thanks for the information. As a woman-owned, small business I borrowed from family and friends. I leveraged every asset I had and I refinanced my home multiple times. Fortunately these creative financing opportunities allowed me to create a growing business. Now I need additional financing to purchase office furniture and data center equipment. In addition to SBA Loans I have found several office furniture businesses that will provide attractive financing on the entire package of desks and data cabinets. I suggest you explore each one before decide to sign up for the deal.

Posted by: Cheryl Edwards, VQV Group

This article makes a contribution because the suggestions made should be pretty obvious but they aren't usually followed. Buyers send in their loan app with some of this backup, but not all. That's usually true. Incidentally, put a business plan in with this package to increase chances of getting the application accepted for funding.

Posted by: Ron F.

This is wise advice for a buyer who is really serious. The application for a loan that is all complete, with everything in electronic form, not only jumps to the top of the underwriter's pile, but also gets the buyer better service from brokers. A broker who knows you are ready and knows you are a real buyer is going to work to find you a business you'll want before someone else does.

Posted by: Steve C.

The reason this is good information for buyers to have is that they often think they don't have to start getting their "stuff" together until actually finding a business that is desirable, and then making an offer. But as Jonathan says, if you don't give a lending officer a complete package, and if you aren't ready with all information that is needed to make a decision about your loan, then your application just won't get considered. And while a buyer is finally getting organized, the business he has his eye on, or hers, can get sold. Even if there's a contract, the delay in getting the loan package put together and into processing can be deadly. Sellers can change their minds while waiting. Maybe a better offer came in.

Posted by: Alex Max

This is a fairly complete list. Where you mention "Minimum of your first 12 months projected P & L" do you mean a business plan? I think that is a better thing to submit than just the numbers expected. The lender wants to know not only what numbers the buyer is projecting, but also how the buyer plans to reach those figures.

Posted by: Chaz A.

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