Financing
Banking Requirements
It is not uncommon for purchasers to seek some form of bank financing for their business acquisition needs. Even cash buyers that are looking to invest in another business may prefer to utilize bank financing as a way to conserve their own cash for additional cash flow and utilize the loan interest write-off.
There are two primary forms of bank financing: conventional loans and SBA loans. Whichever method is chosen will have documentation requirements that take time to fulfill; therefore, purchases seeking financing assistance are urged to get as much documentation as quickly as possible and be aggressive with their lender to keep the process moving quickly. Many loans have difficulty making it through the actual underwriting process; for this reason, keeping the process steadily progressing is important to ensure time is not wasted on a loan that ultimately cannot be written.
There are two primary forms of bank financing: conventional loans and SBA loans.
Depending on the type of financing choses, down payments will vary. Most SBA loans require some form of owner carry in addition to a down payment from the purchaser. Conventional lending does not have a requirement as high as SBA for seller carry, but typically carries higher down payment requirements for the purchaser.
It is recommended that purchasers seeking SBA lending services approach banks with a preferred SBA lending status. These banks assist in streamlining the lending process because they have the capability to approve loans on behalf of the SBA. Popular lending institutions with preferred SBA lender status include:
- Wells Fargo Bank, NA
- U.S. Bank National Association
- Live Oak Banking Company
- Ridgestone Bank
- The Huntington National Bank
- SunTrust Bank
- JPMorgan Chase Bank, National
- BBCN Bank
Collateral is another form of protection lending institutions will look for in writing a loan. It is not uncommon for banks to seek personal guarantees from buyers or assignment of collateral against the loan. Although not always a requirement, it is one that banks prefer if possible. The higher down payment and credit score held by the purchaser(s), the less likely for personal guarantees and collateral.
