Creative Finance; Assuming an SBA EIDL loan

February 18, 2025

by a searcher from Sophia University in The Woodlands, TX, USA

Looking to acquire $1 million business. With 30% adjusted SDE. Business is in New Mexico.
Seller currently has a $150K EIDL loan on the business at 3.75%. - nothing in the market beats that rate and I was wondering if there is way I can assume this debt as a second position to the primary loan.
Anyone done this before? Also would a primary conventional lender consider this as seller contribution towards buyers down (similar to them allowing a seller to contribute 5% of the purchase price?) as it would reduce their LTV on the deal. Any insight would be appreciated.

Also looking to speak to any Loan Brokers out here who may be interested in this deal. I'm at redacted John

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Great question. We have heard this question a lot due to the great rate on the EIDL loans. And technically the EIDL loans can be assigned. However, an assignment of the EIDL needs to be approved by the SBA. The SBA has given clear guidance to SBA lenders that if there is a sale of the business where the seller is getting proceeds that the SBA wants the EIDL loan paid off from the proceeds of that sale. EIDL funds are not intended to be permanent funds. So the seller will need to repay the EIDL at closing. Happy to discuss financing options. I will send you an email as well. Thank you.

Reply by a lender
in Falmouth, MA, USA

^redacted‌ The rate on EIDL is definitely tempting, but because of all the hoops you have to jump through, most buyers prefer to purchase businesses debt-free, with the EIDL paid off by or before closing. If you want to chat about deal financing, feel free to email me at redacted

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