SBA Loan - length of property lease and loan term

by a searcher from University of Washington Bothell - School of Business

10 months ago

Hello - Looking to gain some insight. I came across this info that states your the SBA loan term cannot be longer than the property lease with your landlord. If your lease term is 7 years and you have the option to renew for 5 years, will SBA provide a 10 year loan term? Thank you!


"A common issue we see is related to the length of the lease on the location. The lease term must be at least as long as the SBA loan , which can be a 10-year loan. When purchasing an existing franchise, the length of time on a lease is often less than 10 years. This doesn’t prevent you from getting an SBA loan, you simply need to renegotiate the lease before you can close. If the cost of the lease is significantly higher upon renegotiation, that affects cash flow and your ability to get an SBA loan."
https://www.sba7aloanqualify.com/faqs-sba-7a-loans#:~:text=The%20lease%20term%20must%20be,lease%20before%20you%20can%20close.

0 likes
61 views
4 comments

intermediary from Arizona State University

I had situations where we got a waiver from SBA even though the lease term was short. You can work with your lender to get a waiver if you can show that the property is not essential for the business. Of course, for any business where the location is critical, you would need to work out a longer lease term with the landlord....which can be a challenge!

10 months ago | like reply | 1 like

lender from Eastern Illinois University

I concur with Tyler. So long as there is an existing lease term or a lease with options (so long as they are tenant options) that works. Further, I have done several deals where the landlord was not willing to extend the lease or the buyer did not want to extend the lease because they knew they needed more space. If we can verify there is other space readily available in the market and there is a need to move the business, or that the space the business is in is not vital to the operations of the business, we have successfully gotten this conditioned waived before. Should you have any additional question on this item or any others, you can reach me here or directly at --@----.com Good luck.

10 months ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

Investor seeking Self-Funded Search Deals

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.