The SBA Perspective

by | April 27, 2011

Our guest blog post comes from Lisa Forrest, VP of SBA Lending at Union Bank.  Lisa will be participating in our panel discussion on April 27 from the SBA perspective. 


While we will be focused on the Banking environment and on some Big Picture views for our Equinox Event on April 27th, I wanted to specifically share some insights into the kinds of SBA loans actually being made today.  Two areas of note:  1) Business Acquisition/Partner Buy-out and 2) Commercial Real Estate for owner-users.

Business Acquisition:  1) Business Acquisition by key employees or qualified individuals/third-parties.    2) Partner buys-out a retiring partner.  3) Existing businesses expanding through acquisition of a business in the same or complimentary industry.   General SBA Lending guidelines:  1) 7A Acquisition loans up to $5Million.  2) 25% to 50% down, depending on project size, industry experience of buyer, debt service other credit factors.  3) Seller carry note usually always part of the structure; professional practice acquisition can be more aggressive in this arena.  4) Outside collateral (if available) will be required by SBA to shore-up and shortfalls in business assets.   5) 10 year term, fully amortizing; no prepayment penalties.  6)  Historic seller’s discretionary cashflow must be able to debt service requested debt and buyer’s personal living needs. 

Commercial Real Estate purchase:   SBA 7A and 504 lending programs allow a Business Owner-User to purchase commercial real estate for business operations with 10% down.   This could be a fantastic time to take advantage of a ripe market at historic low interest rates.    General SBA Lending Guidelines:       1) Occupancy 51% for existing building; 60% for major construction.  Allows businesses to lock in expansion capacity at today’s rates.  2) Long-term fixed rates, flexible terms.  Allows owners currently renting to replace their leases, allowing rent payments to become equity.   3) Construction and build-out financing can be part of the transaction.   

Desired Industry types: manufacturing, medical, dental, veterinarian, wholesalers/distributors, certain retail and service.