Pre-LOI SBA Loan pre-approval

May 06, 2024

by a searcher from Harvard University in San Antonio, TX, 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?

5 Likes

32 Replies

355 Views

Replies

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
from University of North Carolina at Wilmington in Wilmington, NC, USA

pre-approval letters are largely dependent on the specific business. Some lenders will give a comfort letter that state they are working with you as a buyer. When you have a business you are looking at sometimes depending on how much data they can beef that letter up a bit. But I would suggest figuring out a way to connect with the broker so they find you to be trustworthy and worth their time is a better way to handle the relationship.

+30 more replies.

Join the discussion