HELOC for down payment on self funded acquisition?

by a searcher from University of North Texas

1 year ago

I have about 100k cash on hand to buy a business via an SBA loan but am needing more cash (250k?) to be able to buy a decent sized business. I'm looking for something that has SDE of >$700k. 

I'm looking at getting a HELOC to cover the gap in funds but wanted to get thoughts on this strategy. I've also thought about looking for friends/family to invest to cover that difference but I don't particularly like that route and would prefer it as a last resort. 

What am I missing or is this a good path to get the needed funds to buy a business? TIA!

2 likes
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8 comments

searcher from New York University

Great information.

11 months ago | like reply | 0 likes

lender from Trinity College Connecticut

SBA guidelines allow a HELOC to be used for the required SBA Equity Injection, but income separate from the salary to be earned from the business being acquired must be available to make the HELOC payments. The easiest way to fulfill this is to have a spouse that has W-2 income, or for the owner/operator to have other verifiable income that can cover this.

1 year ago | like reply | 2 likes

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