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Todays SBA Loan Tip: SBA Loan Requirements Vary By Lender


Today's SBA Loan Tip comes from Andy Dobrov at Premier Business Opportunities:

"Everyone in my circles talks about the fact that equity lines have dried up recently and that SBA loans are far more difficult to get than they were just six months ago. In spite of the gloomy anecdotes, I just completed a Quiznos transaction in record time that involved 85% SBA financing. We literally did the deal from start to finish in under 2-months with full SBA financing while everyone around me said it would be completely impossible. When I started the process, I was told by 7 banks that getting SBA financing on this Quiznos was completely out of the question. Some told me incorrectly that the SBA put a hold on all Quiznos financing due to the high default rate. Others told me the SBA was severely tightening their criteria on restaurant loans in general and that banks are only allowed to approve restaurants with unbelievably strong financials. I received lots of inaccurate and misleading information but I kept digging and finally found a bank that enthusiastically did the deal in record time.

The part that is most confusing and even misleading when dealing with different banks is their tendency to present their own rules as though they come directly from the SBA. You see, the SBA is a government agency that effectively provides an insurance policy to the bank on their business loan as long as the bank follows certain guidelines. The bank also has its own rules and approval criteria in addition to the SBA requirements, and it is not always easy to differentiate between the two. People can become discouraged by the entire SBA loan process because they initially get enthusiastic responses from their local bank and then find out the deal cannot be done due to some unforeseen obstacle. This is very common because once the agent begins to collect more information about the business, credit histories, and experience, there are always going to be unforeseen challenges and obstacles. Once an issue is discovered, the big question is whether it is specific to that bank or an actual SBA issue.

Most banks will lead you to believe that all issues are SBA issues because they don't like to admit that their own rules are stricter than their competitors. They would like you to believe that all rules come from the SBA itself when almost half of them are unique to that bank. Figuring out whether the issue is a bank issue or an SBA issue is absolutely critical because it determines whether you have truly hit a roadblock in obtaining SBA financing or whether you simply need to go to a different bank.

For example, all banks like to have the landlord sign an agreement that gives the bank first priority access to the fixtures and equipment in case of a default on the loan.. However, not all landlords are willing to sign an agreement putting the bank first in line to take the equipment. Some landlords think they should be first in line if they are not receiving rent from the tenant. If a landlord does not agree to sign the "Landlord Subordination Agreement", some banks will immediately deny financing while others will agree to proceed without it. If a given bank is not willing to make an exception, they will almost always tell you that it's an SBA requirement and there is no way to do the deal without the landlord's cooperation. However, that requirement is not an absolute SBA requirement at all, and it is up to the bank to decide whether or not they will allow exceptions.

These types of issues come up frequently during an SBA loan, and it critical to have the right consultant help you figure out the difference between a real showstopper and a minor obstacle, because experience will usually make or break your deal."

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What have been your recent experience with SBA lenders in getting financing to buy a California business?  Submit Your Comments  and share what you have experienced lately.


Categories: Small Business Financing



  Helpful Resources To Assist In Selling And Buying California Businesses
Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Brad Steinberg, Broker - Laundromat Specialists

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers

I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.

Joe Sandbank, Esq. - Legal Services

I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.


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