SBA loan rejected

October 10, 2023

by a searcher from University of South Carolina - Darla Moore School of Business in Charleston, SC, USA

Are there stories of people who had their SBA loans rejected, and then used that as a basis to dramatically lower the price and with purely seller financing? What is generally the best way of doing this?

I'm working on a deal which I know has red flags. I am 100% sure the bank will call these things out and reject the loan. But, I want to use the rejection as leverage to offer a price which is 40-50% below ask. I am basically looking only to acquire the contracts they have with their customers.

Is this unethical, stupid, or a waste of time? Or is it a commonly used practice by buyers?

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Reply by a searcher
from Virginia Polytechnic Institute and State University (Virginia Tech) in Blacksburg, VA, USA

I think this is a bit silly. If you can't qualify for a loan, that would be more of a reflection on you, in my opinion. Either you yourself aren't bankable, or you've created/agreed to a deal structure that doesn't make sense. If a bank thinks you're a bad bet, why would I, as a seller, have confidence? Banks are better at underwriting than me. If you're sure that a deal structure won't work, propose something that will. Believe me...any broker worth their salt knows their strike zone...they know what will work and what won't fly. If they're smart, they'll have educated their seller on probable deal terms. If the seller doesn't accept it, just depart in a friendly manner and ask them to reach out to you if anything changes. Check with the broker every couple of months to take his temperature. To answer your specific question -- unethical, stupid, or waste of time? Yes.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I do not know how the seller is going to react to your loan being rejected. The fact you could not get the loan approved in theory could be because of the business but it also could be because you could not qualify. The seller and broker (if there is one) might just move on from there and not negotiate.

I usually find if a deal will not work under an existing structure the best thing to do is get it into a structure that would work and present that structure to the seller and their broker and explain why you need to use this structure to get it done. Sometimes that will lead to a lower price or more favorable terms (such as more of a seller note), but it still does not mean they will go for it. I hope this helps. If you wish to discuss you can reach me at redacted Good luck.

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