I wanted to make a post that addresses some of the hurdles that I see in the post-approval/closing process. Most of these items are within the buyer’s control, so the earlier you can address these items, the better. These items are big-ticket items that can derail your deal if they are not worked on until last minute.

1. Life Insurance- if there is a collateral shortfall or there is no formal succession plan- SBA requires life insurance. Life insurance can take weeks, so I would recommend having a good life insurance provider on standby. There are life insurance providers that specialize in SBA, and most SBA lenders can make an introduction to a provider.
2. Landlord Waivers- all SBA loans require this. In my experience, landlords usually push back on the bank’s waiver. Landlords may have their own templates or will redline the bank’s version. This can take weeks, so asking for the bank’s waiver upfront to have your landlord review beforehand is highly recommended.
3. Allocation of the sales price- in some cases, this is not prepared until after the approval is issued, because the purchase agreement wasn’t executed until after the due diligence process. I would recommend having the allocation of the sales price addressed in the LOI if possible, so the SBA lender can determine the intangibles and tangible assets being acquired.
4. Permits and License Transfers- If a license or permit is required, the bank will want that before closing. However, there are some instances, where the SBA lender will need to make it a post-closing requirement because the permit cannot be obtained until the business transfers to the new owner. Have this conversation with your SBA lender and educate yourself about what permits and licenses can be obtained before closing and what cannot be obtained until the business transfers. You don’t want to find out at the last minute, you can’t get the license and the bank won’t close without out it.
5. Equity Injection- Equity Injection can be difficult during closing because usually deals have been in process for months. In ETA transactions, equity injection can come from a combination of buyers and investors cash, along with seller financing. Cash injection funds need to be seasoned for two months and the source of the funds cannot be borrowed. Expect the bank to request for bank statements going back more than two months, if the source of the money cannot be easily verified. I would recommend setting up a bank account for the entity and have the cash placed in the account for at least 3 months to have enough time for seasoning. If you have spent monies on the project and want the bank to consider those costs as part of the project costs- have an itemized spreadsheet of what you have spent and the bank will confirm what can be credited.
6. Bulksale- Some states require bulksale transfers. If your state requires it, discuss with your attorney who will handle the application to the state. In some cases, the seller’s counsel will complete it or the buyer’s attorney will complete it. This should be addressed to make sure it’s filed when the allocation of the sales price has been finalized.
These are some examples of what can delay your closing. There a lot more but these are some big-ticket items that SBA lenders will not close without.