Other loans alongside SBA

June 22, 2021

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

Does an SBA loan preclude other secured debt from being taken on either together with or after closing? I'm looking at a deal that would be financed with an SBA loan but I would need to get a heavy duty pickup truck pretty much immediately. I'm wondering if having an SBA loan for ~90% of the purchase price would prevent me from getting a business or commercial auto loan. Thanks in advance for any insight.

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Reply by a lender
from University of Missouri in St. Louis, MO, USA

you shouldn't have an issue getting a truck loan post close. The person financing that would have specific lien filed against the title. There could be a covenant against capex but something like that would likely be below the threshold. The issue most people have post close is working capital. I would recommend doing an Express line (or a conventional line) at close with the same lender you do the SBA loan with. Even if you don't need the line at close you should get one in place so that you can have the working capital assets allocated to first position on the line. Then if you need the line increased later you are already set up properly.

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

The SBA does not prohibit you from borrowing additional money. However, the fact they take a first position perfected security interest on all business assets can make it challenging to get other debt. The most common debt I see business owners get is auto loans or equipment loans where you can get purchase money financing which is not impacted by the SBA lien. Also, some SBA lenders will not take accounts receivable and inventory as collateral and will allow you to get a line of credit with another lender utilizing those assets. I hope this helps. Please let me know if you have any additional questions.

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