How standard are SBA Term Loan Agreements?

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July 13, 2023

by a searcher from Emory University in Marietta, GA, USA

How standard are SBA Term Loan Agreements? Does anyone have examples of what a good term loan agreement is from an SBA lender is vs a bad one?

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commentor profile
Reply by an investor
from United States Naval Academy in Colleyville, TX 76034, USA
You've gotten the key message - the SBA terms are pretty standard and aren't really negotiable. What you should really be thinking about is developing relationships with a number of lenders and understanding their credit policies and how they think about it. A lot of opportunities are pretty "vanilla" and most banks will do them, they all price out about the same and have similar policies. Where having a good network comes in handy is when you find a bit of a "niche" business. Some banks like those, others don't, so having a good network to reach out to really helps.

Certain lenders like certain deals and don't like others. If one bank doesn't like it it may not be a bad deal (although it may be a word to the wise), it may just be that bank doesn't like that business model. I talked to one bank this week on a deal I'm working, they thought it was a good opportunity they just don't lend in that space. I got introduced to two others who do and now have a good understanding of what those lenders are looking for.
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Reply by a searcher
from University of Maryland at College Park in Frederick, MD, USA
The SBA has recently hit the reset button on this. SBA terms and what is allowable has changed radically and the review period for congress to object runs out in August. You can now do many new things. including only buying a portion of the equity and they have enabled earn-outs. Many SBA approved lenders are not pushing the new benefits and flexibility yet because there is still a tiny risk. If you have a specific deal call Live Oak Bank. https://www.liveoakbank.com/ They handle a huge amount of deal flow and last year were one of the top SBA lenders.
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