Multiple SBA Loans in 2 years?

October 25, 2024

by a searcher from Carnegie Mellon University in Haddonfield, NJ, USA

Hello, I'm looking to purchase several smaller home services businesses in the next 2 years to pull together under one umbrella and offset seasonality. Does anyone have experience with this type of process with SBA loans? I'm new to business purchases, just coming out of corporate America, although I've run real estate investment business and consulting LLCs. I'm planning to utilize SBA for each purchase, and I think I'll be able to leverage cashflow/equity from one to the next, however as I'm trying to model it out I figured I'd see if others have any advice on this plan.

Thanks!
Matt

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Reply by a searcher
from University of Virginia in Boulder, CO, USA

This is a great modeling question. At the end of the day you are going to have to figure out whether you want fast scale (you'll need outside investors) or slow-grow acquisitions (SBA works well). My personal experience is that the actual people underwriting these SBA loans matter more than you think. So if you can establish a great relationship with a bank, then you should be able to do one SBA loan per year for a while. Getting the money isn't going to be your biggest challenge. Finding/managing good operators for your businesses is going to be 99% of your problems.

Very few people understand (including me!) how hard it is going to be to keep everyone happy all the time in a business of normal complexity. My trick was to bake in a 'new operator' multiple into each quarter that slowly goes down a bit every year until it hits zero in 2.5 years.

Hopefully that makes sense!

Reply by a lender
from St. John's University in Ponte Vedra Beach, FL 32082, USA

redacted‌^redacted‌ ^redacted‌ Great question and with the current SBA SOP ^redacted‌ is correct on 7a limits within NAICS code. Managing your timeline in these acquisitions and stabilizing each prior to expansion into the next will enhance the comfort of most lenders. Depending if there is real estate included in the purchases and how that portion is structured can extend some of the exposure for SBA guarantee. Happy to have a direct conversation and discuss in more detail, bturner@thebancorp,com or###-###-#### .

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