Banks flexible on 0% down transactions (assuming sufficient DSCR)

searcher profile

December 09, 2023

by a searcher from University of Pennsylvania - The Wharton School in Chicago, IL, USA

With the recent SBA revisions potentially allowing for 0% or 2.5% down payments depending on transaction structuring, does anyone know of a list of lenders that will finance 0% down deals? Where a deal is structured appropriately and debt coverage is sufficient, minimizing down payment and keeping powder dry is attractive for many reasons. Appreciate recommendations on banks that will do as low as 0% (or 2.5%) down. Thanks!

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
We are a commercial loan brokerage shop with over 500 funding partners and over 50 SBA lending partners. I can tell you that I have seen very few Banks offering to go with the 100% financing on SBA business acquisitions. Most of still requiring a minimum of 5% to 10% borrower equity. The only times I have really seen Banks stretch and do deals with 0% down or a very limited down payment is usually if they already work for the company they are buying, they have strong direct industry experience, or it is a strategic acquisition and they already own another company in the same industry.

I would never say there are not some lenders doing 0% down that I am not aware of, but I would recommend caution if you see some terms offering it. I have run into a number of clients that have been baited in by lenders offering 0% down to have the approvals then come back requiring a down payment later. So if you get an offer at 0%, be sure the lender really can do it that way or you could burn a lot of time and be stuck in a bad position.
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Reply by a searcher
from Virginia Polytechnic Institute and State University (Virginia Tech) in Blacksburg, VA, USA
I’ve gotten zero down deals, but in every case it has been because I was acquiring a business very similar to one I had already acquired, so it’s considered an expansion of an existing business, even if they’re in different states.

Generally the only people that are getting these offers are the people that are already successful and probably don’t need it. I very much doubt an inexperienced operator could get something like this done, so I recommend you don’t build your strategy around it.
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