What is SBA Pre-Qualified?
Buying a pre-existing business has advantages over establishing a startup, starting a franchise, or other ventures that require starting from the ground up. As such, for many excited entrepreneurs, it is the preferred option. A business likely comes with existing cash flow, a customer base, trained staff, and proven processes.
However, savvy entrepreneurs are looking to get the most bang for their buck with a business purchase. Being SBA pre-qualified helps give confidence to potential buyers that they can secure financing and grow the business that is being sold– that it will be a wise investment.
SBA loans offer some of the best financing options with small down payments and low-interest rates backed by the government. Due to this, they are appealing to any intelligent business investor.
Getting pre-qualified for an SBA loan can make the sale of a business smoother. It will help set the business apart as there are not a large number of companies currently for sale in the U.S that are SBA pre-qualified (not necessarily because it is hard to get, but because they haven’t thought about it).
10 Reasons Why To Get A Business for Sale SBA Pre-Qualified
- Thorough high-level underwriting of the business to get everything needed up front so it doesn’t hold things up later.
- Instantly know that your business listing is financeable and what a financing structure would look like for a potential buyer.
- The business listing won’t just be a regular listing, it will be an “SBA Pre-Qualified Listing” and really stand out from the competition.
- Give buyers the added confidence that they will be able to finance this transaction.
- Perform all the heavy lifting beforehand, not when the buyer’s stress level is high towards the end.
- Term sheets are so thorough, they are almost as strong as a commitment and mostly turn into an approval.
- Rates and terms will be clearly stated on the term sheet so any buyer can see what to expect.
- Provides a buyer profile to target the right buyers based on researched recommendations.
- The pre-qual will be from an actual financial institution that is in the market. This gives the business added credibility to potential buyers.
- No longer rely on cash buyers or seller notes to fund a deal, especially for businesses over $500,000. That limitation is now lifted, the potential buyer can count on a reliable financing source.
More Advantages of Being an SBA Pre-Qualified Business When Trying to Sell
Should you get the business SBA loan pre-qualified before trying to make a sale? We think you should. Here are some reasons why.
Smart Business Acquisition
Smart investors don’t buy businesses on a whim. They spend extensive hours researching the various options on the market. By being pre-qualified for an SBA loan, you can present the business as the needle in the haystack they have been searching for.
Become that rare business that is pre-qualified, can be purchased with little money down, and is a great investment opportunity.
Banks are Financing
If it’s so great to be SBA pre-qualified, you might be thinking, why don’t all businesses for sale go down this road. We understand your skepticism. You don’t want to waste time trying to get pre-qualified if it all comes to nothing.
While it is undoubtedly harder for some businesses than others (especially those that handle a lot of cash) to get pre-qualified, it is not impossible or even difficult.
Banks are willing to lend, and more and more SBA loans are being acquired every day. In 2020, loans guaranteed through traditional SBA lending programs exceeded $28 billion.
The financing is there to be acquired, and purchasers know it. They can snatch up a business with little money down (sometimes less than 20%) and find a bank willing to lend with little problems.
The Heavy Lifting Is Done Up-Front
When a business gets pre-qualified for an SBA loan, the heavy lifting is done upfront. Underwriting the business is complete before the sale, so you know once the deal gets moving, it will run along smoothly. There will be no annoying paperwork issues to overcome down the line that could slow down or disrupt the business sale.
Doing so also helps give confidence to the buyer. They know the purchase process will be simple, and this makes them more inclined to buy.
Solid Terms and Know What To Expect
If you come to ICA to get an SBA loan pre-qualified, know you are getting a team that will process term sheets so thoroughly they are almost as strong as a commitment and usually always turn into an approval.
Rates and terms will be clearly stated on the term sheet so any buyer can see what to expect. They will approach purchasing the business with a level head, knowing there will be no surprises and no questions left unanswered.
If You Haven’t Figured It Out by Now, We Think It’s Worth It
SBA pre-qualified loans can make any business sell fast and straightforward. It helps the business stand out to buyers and gives them confidence in the investment they are about to make.