Northwest Bank SBA underwriting updates

January 25, 2024

by a lender from Kutztown University of Pennsylvania in Mount Joy, PA 17552, USA

Hey Search funder family

We are making some existing changes to our underwriting and I wanted to share incase someone need some financing options. I corrected this post on 1/30/2024 to give more details on larger deals and pari-passu.

-We are comfortable with a 5MM goodwill deal and in most case we stick to a 1.15 DCR for deals under 2.5MM, if a deal is larger we do look for a stronger debt coverage of at least 1.40 and hopeful the guarantors have good post closing liquidity. -We are not stress-testing our deals aggressively, which means more deals will be approved by underwriting. -We are looking to do 25-year terms for CRE with no equity requirement for businesses expanding to a large Facility/Office -We will start getting into ESOP SBA deals, a niche aspect of SBA lending. -We are comfortable with deals that require Pari–Passu. Of course the deals have to cash flow the debt since it may not be a standby. Tax returns with adjustments should cash flow both the SBA debt and the traditional loan -We will provide 100% financing on a business acquisition if the business purchased will have the same NAICS code, within the same geography, which is subjective, and has the same ownership structure.

I appreciate the continued partnership and if want more details please reach out.

Reply by a lender
from Kutztown University of Pennsylvania in Mount Joy, PA 17552, USA

Pedro, We aren't concerned with industry's, of course some industry carry more risk them other and we do weigh those factors. The SBA SOP states that if you are buying a business with a similar NAICS code, similar ownership and same geographic area (which is subjective) it can be financed with no cash in. Upgrading to a large facility or office would also qualify for no cash in financing. Hope that helps

Reply by a searcher
from University of Virginia in Washington, DC, USA

These seem like quite favorable changes. Could you elaborate on the industries eligible for these financing options, particularly regarding the 100% financing for business acquisitions?

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