Banks with low downpayment

searcher profile

May 03, 2024

by a searcher from George Mason University in Manassas, VA, USA

So on my deal at $3.4M via SBA 7(a) I have a 10% sellers note and the bank approved me to just put 2.5% in.

i see so many brokers saying “you need at least 10%”, and tons of buyers mentioning 10-20%

im curious why more banks aren’t offering the 2.5% to draw in more business? Its been allowed for over a year

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commentor profile
Reply by a lender
from University of North Carolina at Wilmington in Wilmington, NC, USA
DSCR comes into play with down payment too! Just because the SBA allows 2.5% doesn't mean the business can support 97.5% leverage! Lots of buyers in the market so sellers don't have to come down on their multiple, Max leverage isn't always the best in the long term. Really want to think about your growth strategy too.
commentor profile
Reply by a lender
from Clemson University in Reston, VA, USA
It comes down to the strength of the company and the multiplier. I have financed 100% several times when the company was under valued and the broker or investment banker didn’t understand the industry. Leverage under 3x and cash flow is strong is usually the key. I typically stay away from SBA financing because of the restrictions. There are a lot of banks that have flexible terms they just aren’t the big banks since their loan boxes are very defined.
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