Funding for a non-SBA deal

May 20, 2024
by a searcher from The Ohio State University - Max M. Fisher College of Business in Columbus, OH, USA
I'm currently in the process of acquiring a distribution company and am ready to submit a Letter of Intent (LOI). However, I've encountered a hurdle with the lease terms. The landlord is only willing to offer 2-3 year leases, while SBA loans require a 10-year lease to match the loan term.
I'm looking for advice or recommendations on alternative investors or loan options that don’t require such long lease agreements. Has anyone successfully navigated a similar situation using non-SBA funding? Any insights on alternative funding sources or strategies would be greatly appreciated.
Not that the short term lease is to be over-looked, but something I will workout in the contract
Thank you in advance for your help!
from University of Pennsylvania in Seattle, WA, USA
I would consider showing your lender how easy it would be to find a new space and even consider having money set aside for move expenses. The 10 year is also inclusive of extensions, would the landlord allow a 3 year lease with a few extensions included? Prior to negotiating an extension on the lease with my seller, I had a 7 year lease and my SBA lender was willing to move forward with the loan but appreciated that I continued negotiating and was able to secure a 10 year lease.
If all that is too much, you can go the non-SBA financing route but it gets much more challenging for the standard SBA deal - expect to need to bring more equity to the table. I haven't talked to a conventional lender in over a year but last I heard was ballpark of 5 year term w/fully amortizing loan and max leverage of 2.5 turns of debt - for all the deals I looked at, this was a non-starter.
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I would be happy to have a discussion and see if we can provide assistance here. You can reach me here or directly at redacted One thing to keep in mind is that conventional or alternative lending is going to have much worse terms likely than SBA financing, so if you can find a way to make it work with an SBA lender you will likely be better off. Good luck!