SBA loan approval based on Industry experience?

April 25, 2024

by a searcher from University of Florida in Vero Beach, FL, USA

I have been searching for a business for a few months now. I was introduced to a SBA loan broker by a mutual business acquaintance. I have been discussing multiple businesses in multiple industries with this broker. I currently have found a great business for sale. There is no business broker involved, I am working directly with the seller/owner. We are getting close to executing an LOI. The business is a distribution business that sells used and reconditioned mechanical parts in the transportation industry. There are trained financial, sales and warehouse employees in place and all reconditioning is handled by third party vendors. My role as a new owner would be to run the business.. When I explained the business to the broker he asked, what kind of experience do I have running a company like this? He indicated that his lenders and the SBA would probably not lend to someone without experience in that industry. I have not be aware of this requirement before this conversation. I have owned and operated businesses in multiple industries for over 20 years and I have purchased a handful of businesses over the years. I have a Mechanical Engineering Degree and a Master in Business from University of Central FL and University of FL respectively. I only utilized an SBA loan for one of the businesses I purchased previously. That SBA loan was for a business that I purchased in an industry that I had no previous knowledge or experience. It has been almost 15 years since I went through the SBA loan process. Has the requirements changed? Is the broker I am working with with incorrect? Does anyone have recent experience with getting an SBA loan without industry experience?

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

Mike, I would be happy to have a discussion. I always tell my clients that experience is one of the key underwriting points that SBA lenders look at when underwriting a business acquisition. However, I have found that experience does not necessarily need to be in a specific industry. If you have relatable business experience that will often satisfy the requirement. It sounds like you have that experience. Unless the business you are buying requires someone extremely technical in that industry based on the role you are replacing, you should be fine. You can reach me here or at redacted if you would like to discuss further. Good luck.

Reply by a lender
from University of Rochester in Medford, MA, USA

Thanks Luke. Typically, prior industry experience is one of the considerations for when underwriting an SBA loan since lenders would like to ensure a smooth transition with the new owner.and therefore being able to show industry experience will help suppport the loan. However, it's not something that would prevent the loan as there are mitigating factors for the lack of direct industry experience like transferable skills and others. Would be happy to discuss in detail if you contact me at redacted

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