Pre-LOI SBA Loan pre-approval

May 06, 2024

by a searcher from Harvard University in Charlotte, NC, USA

I talked to a couple brokers who mentioned that sellers would be more interested in talking if I were to get an SBA loan pre-approval.
i.e they had other buyers who have all cash offers.

That triggered a few questions:
1- Is this true/a trend? One was for an accounting firm deal, the other for a manufacturing deal.
2- If it is true, how does one go about getting a loan pre-approval from a lender without a deal on the table?

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Reply by a lender
from California State University, Sacramento in Auburn, CA, USA

I have been an SBA lender now for 35 years and while MOST of our decision about the financing of a project is seller financial driven (historic taxes, F/S's, trends, adjusted cash flow, industry, etc.), a qualified buyer is also important to a deal. As such, most SBA lenders offer buyer prequalification letter.s It is a much more generic prequalification letter than one that is deal-specific (post LOI or purchase agreement) and includes reference to a buyer's acceptable available cash investment, collateral (if any), acceptable transferable management experience, and acceptable credit history. In addition to an SBA lender prequalification letter, you might consider submitting with your LOI (or Purchas Agreement) the following: 1) verification of funds, 2) management resume(s), and 3) credit history(ies). Full disclosure demonstrates your confidence in self and provides assurance to a seller that you are serious, have the resources, have done your homework, and are forthright with nothing to hide. Brokers and sellers work with tire-kickers every day and this approach often gets your LOI looked at more seriously.

Reply by a lender
in Stuart, FL, USA

You will find that when a seller usually requests a buyer pre-approval letter, it's because he has experience in residential or commercial real estate and that's typically what happens. In real estate, it's simple, the buyer qualifies or they don't, and the property stand on the appraisal. With SBA, you have three things.1-Whether the buyer qualifies or doesn't 2-whether the business qualifies or doesn't 3-and the third, which is called the global, is when the buyer and sellers information is joined to see if the deal works together. So while the pre-approval letter for the buyer can be somewhat helpful to help ease the sellers mind it really doesn't do much in the grand scheme of things. Keep in mind, every lender is different in how they approach SBA deals and every deal stands on its own merit. What may work for one deal at one lender may not work on another deal with a different lender. That is the benefit of using a company like mine as I deal with everybody and I know which lenders accept which deals and how to structure them and put them together. Feel free to reach out to me if you need to. Thanks

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