What's the usual post-closing liquidity required by SBA lenders?

February 07, 2023

by a searcher from Harvard University - Harvard Business School in New York, NY, USA

Is there a ratio or percentage to calculate the usual post-closing liquidity required by SBA lenders ?

Thanks,

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

Just to provide some perspective, we are a Commercial Loan Brokerage Shop with over 500+ lending partners. We have roughly 60 lending partners on the SBA side. With that in mind, I can tell you the post closing liquidity requirements not only vary by lender, but can also vary based on each deal and the overall guarantor strength. Deals with stronger cash flow are more likely to have more flexibility on the post closing liquidity. Most of our lenders will do what they can to be sure clients have sufficient liquidity post closing to support debt service. This can come as working capital funded in the loan or a separate working capital line of credit. I think for most lenders they key is being sure there is enough working capital available in general to support operations versus pegging it to a specific percentage. If you need any help doing that analysis or a perspective on how to do it, please just shoot me a note. You can also reach me directly at redacted

Reply by a lender
in United States

Based on my tenure in business acquisition SBA lending, typical post-closing personal cash liquidity of proposed 20%+ business owners of a business acquisition is 3-6 months personal savings to cover all household personal expenses. The greater the intangible assets/unsecured portion of the overall business acquisition loan project, the greater the personal savings required. The bank or nonbank SBA underwriter needs to have a comfort factor whereas if there was a family emergency, the proposed 20%+ business owners have sufficient personal cash to support. By the proposed owners having the personal liquid cash set aside, as reflected on the SBA personal financial statement, the underwriter won't feel threatened that the borrower will be tapping into the business cash flow for a personal financial need.

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