There are five requirements to keep in mind about applying for an SBA loan. Keep reading so that you are prepared for success.
- Minimum Down Payment
A 10% minimum down payment is the SBA requirement but there are many factors that can change the down payment requirements for a successful SBA business acquisition loan. It is important to note that the down payment should not be an “all-in” leaving the buyer without a “rainy day fund.”
- Down Payment Sources
“Cash is King,” so they say. The best source of the down payment for a business acquisition is most likely cash or savings. Other sources of the down payment can include: Home equity can be used as a down payment source. A gift from a family member or friend documented by a formal gift letter.
- Business Cash Flow
The business cash flow needs to be strong enough to support overhead, operations, new owner salaries, and the SBA monthly loan payment.
You should have direct experience in the industry of the business you are planning to purchase.
- Personal Credit History and Background
Tell the bank if there are any derogatory marks or background issues so they can be properly addressed. The lender will work with you to provide the proper explanations and documentation during underwriting.
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