Best SBA alternatives?

searcher profile

November 16, 2022

by a searcher in Los Angeles, CA, USA

What are the best loan — not equity — alternatives to SBA? I'm looking at a longstanding service business in CA with a physical location and stable revenue. The deal is ~$500k, seller willing to carry some (exact amount is TBD), and I'd prefer not to put down more than 20% myself.

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Spencer, I would be more than happy to have a conversation with you on this. The most common means of financing a business like this non-sba is via conventional financing. However, with conventional financing you typically need 35% to 40% down and you would only have a 5-year loan term. This is versus the 10% down and 10 year loan term with the SBA option. Plus, with a deal this small it is going to be hard to get a conventional business acquisition lender to look at the deal. We do smaller balance SBA lending. We are a Commercial Loan Brokerage Shop and I would be more than happy to discuss all financing options with you at any time. You can reach me here or directly at redacted
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Reply by a lender
from University of Missouri in St. Louis, MO, USA
HI Spencer, the way to avoid the SBA on this is to have full collateral coverage (either in the business, personal or a combination). Otherwise most banks will have an issue lending money on a deal like this. Part of it is the bank's risk tolerance and part of it is regulatory. There are non-bank lenders who might play ball but I would imagine there will be equal or greater negatives (depending on what you deem important) on that type of loan as well. I would mention that an SBA loan under $500,000 does not have a guaranty fee anymore so the cost of this size SBA loan isn't as prohibitive as it would have been a few months ago.
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