SBA APPOVED ???

January 22, 2020

by a searcher from University of Dundee in St Albans, UK

Is there anything like a company for sale being SBA APPROVED? Come across companies where the Seller/Broker would often state this ... does anyone have experience around this ... is such a statement TRUE?

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Reply by an intermediary
from University of Colorado at Boulder in Boulder, CO, USA

We find that it is very valuable to both buyer and seller to have had qualified lending institutions review the financials of a business that is being sold, and provide an outline of the possible lending terms (assuming a qualified buyer of course). Typically we will look to get the opinion 0f 4-6 lenders, and we will provide buyers with the contacts for each of those responding favorably (and even those who don't). Depending on the experience of a buyer, we feel that the sooner they engage with a lender and learn more about the process and the variables between lenders, the better, since choosing a lender is a key aspect of a successful transaction. Also, lenders tend to be cautious. If they are willing to indicate interest in financing a specific business it is an indication that the business has been properly packaged and priced for sale. I would disagree that this is a "gimmick", rather it is one more piece of useful information in the buying process. And since we would not ever take a referral fee from a lender for steering a buyer to that lender, that isn't an issue. But I would agree fully that any acquisition loan requires specific terms and specific qualified buyer. Until then there is no commitment, just guidance.

Reply by a lender
in Yorba Linda, CA, USA

It's more of a marketing gimmick. Brokers will sometimes ask a lender to preview the CIM and put together something similar to a term sheet stating the business is pre qualified. Be aware also that when brokers steer you hard toward particular lenders, it is often (not always) an indication that the broker is being paid a referral fee by the bank. There really is not enough to qualify a business for an acquisition loan until there is: 1) a signed LOI 2) a full financial package on the buyer, including resume so the lender can assess skill set fit, etc.

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