SBA Financing Questions

September 09, 2021

by a searcher from Duke University in Tulsa, OK, USA

I just want to confirm my understanding of SBA financing. I've had a couple of brokers in the past year tell me I can't afford the business I am inquiring about because my personal net worth doesn't exceed what the SBA loan value would be.
I typically counter this by saying I have already spoken with multiple bankers about my financeability and the listing is consistent with my ability. I also explain that I believe the purpose of the SBA loan in these cases is to help with the financing because yes I do not immediately have X millions of dollars available to buy the business outright and few buyers do.
This has never gotten me past this road block. I just want to confirm that my understanding on the SBA is correct and if I am correct why would the broker do this? Are the business financial and tax statements in such poor condition that it wouldn't be financeable on its own (I have seen this before)? Has anyone else experienced this before and gotten around the broker?

Reply by a lender
in Yorba Linda, CA, USA

I agree with ^redacted‌, you can get a letter of support from an SBA lender. There is no requirement for an SBA loan to be supported by the net worth of the guarantor. Perhaps the broker is only familiar with SBA lenders with an asset/collateral focus in their underwriting (these lenders of course don't fund many acquisition loans). Invite him to attend a Live Oak Bank Office hours call, we'd be happy to help him see how we underwrite!

Reply by a lender
from The University of Chicago in Schaumburg, IL, USA

Echoing the above, the personal guaranty is much more often used to tie the buyer to the target and the resolution of a troubled loan (prevents "handing the keys back to the bank") than as a primary means of repayment. Hence, any broker who feels a large personal net worth is required to borrow money is out of touch. At Byline Bank, we have Opportunity Committee each Wed and Fri to prescreen credits. Assuming OC results in a green light, a formal loan proposal can be issued in support of the transaction.

+3 more replies.

Join the discussion