Moving forward on a deal with an expiring lease?

June 24, 2025

by a searcher in Illinois, USA

Currently exploring a SBA-sized deal for a distribution business whose lease expires at the end of the year. Extending the lease is not an option. The seller plans to keep the business in the same vicinity of the existing operation, and there is nothing unique or proprietary about the facility itself. Is it possible to move forward on this deal without a new lease in place, and is it worth being under diligence, while the owner is looking for new space? Or is this deal on the sidelines until the new location gets sorted out?

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Reply by an intermediary
from Indiana University at Bloomington in Carmel, IN, USA

Thanks ^redacted‌ for the tag. As mentioned, SBA requires a lease in place for the term of the loan can be with options. We have assisted our clients buy the business and then move it. The rule was mainly set up for restaurants and retail. If you can find a suitable facility, lock it down prior to closing and the time and cost to move isn’t detrimental to the business, then a good SBA lender will do the deal.

Reply by a searcher
from University of Pennsylvania in Seattle, WA, USA

This is mostly a lender risk question for closing. Talk this through with your top lenders to see their appetite to take this on. My guess is that it is probably a "no". I have gotten SBA lenders who I had a warm relationship comfortable with 2-3 years left on a lease for specific deals that had commodity spaces, rent was shown to be at FMV, and the deal had budgeted for moving expenses. From an investment/operating perspective, this is adding a big risk on what is already a risky and levered deal. Given you are 6 months from needing to be in a new space, I would personally slow walk the deal to close early in the new year in the new space. Most closes are###-###-#### days, I could not imagine closing and dealing with all the new things flying at me while also planning a move within the first quarter of operating.

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