Seller doesn't want SBA = Code for not financeable?

May 24, 2025

by a searcher from Columbia University - Columbia Business School in Jacksonville, FL, USA

I've heard numerous seller's say they don't want SBA buyers. I'm fortunate enough that I can use conventional, but often feel like this is just another way of saying "banks that have looked at this deal won't finance it". What are people's thoughts on this?

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Reply by a searcher
from California State Polytechnic University in San Diego, CA, USA

Maybe, you can always go in on the LOI with a backup financing offer if you really want a deal. ie I'll buy it for this much financed via SBA but have $ available if bank does not approve. But also it doesn't matter, if the numbers make sense, you'll find financing. If they don't, well deal sucks anyway. Get that no as soon as possible and move on.

Reply by an intermediary
from The University of Michigan in Bonita Springs, FL, USA

I believe the seller's/broker's statement hinges on one or two of three reasons: 1) The number of buyers who come into deals thinking they can purchase with 0% or 5% down has grown dramatically in the past few years. SBA's new rules require a full ten-year holdback on any equity injection from the seller if the buyer does not come with at least 10% down. What seller wants to wait 10+ years for part of their purchase price? If you can't come with 10% down, you are putting all the risk on the seller and the bank. Who wants a buyer who hasn't demonstrated the fiscal responsibility to accumulate some wealth and/or who isn't willing to at least equally share in the risk? 2) The number of buyers who come into deals without an SBA Lender pre-approval themselves is very alarming. The time for a buyer to find a lender, prepare their information, and eventually get a deal done is also time the deal could remain on the market for more financially sound buyers. Why should a seller wait for you to get your act together? Come to the table with your own pre-approval letter and your diligence assistance lined up. 3) As you mentioned, the business will not qualify for SBA lending for any number of reasons, e.g., recent change of ownership, unreported cash, etc. Sometimes, these can be good deals for buyers as long as the deal structure protects the buyer and gives the seller the ability to recapture value if the risk is mitigated through time.

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