SBA loans - longer term amortization without real estate?

investor profile

September 29, 2023

by an investor from Columbia University - Columbia Business School in Seattle, WA, USA

I'm looking at a business that has fleet of vehicles and containers that have current market value worth almost 70% of the purchase price of the business. The nature of the business is very low risk in general, with most of the revenue recurring and stable for the past few years.

Would SBA lenders be willing to entertain longer term than the typical 10 year for a business like this, given the value of the physical assets that come with the business? 15 years perhaps? Given the low risk profile of the business, it's priced at premium so having longer amortization term will definitely help with cashflow and DSCR.

Any lenders here that can provide perspective?

Thank you

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Reply by a searcher
from Texas A&M University in Johnson City, TN, USA
You might be able to do it 504 vs 7a. There are some great bankers here that can probably figure out how to get you there in asset heavy business. Up to 25 years amo is possible (not just for Real Estate!). Your asset appraisal and useful life are key. If there is any goodwill be prepared for seller note / roll there.
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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
It is possible to get a longer amortization on equipment if the useful life of the equipment exceeds 10 years. The biggest issue you would have in a purchase like this is what the breakdown is of equipment versus business assets. I suspect SBA lenders are going to treat it similar to real estate where they will assign 10 years to the portion of the transaction that is goodwill or other assets and higher to the percentage of the business that is fixed assets with an expected life that exceeds 10 years, and then you end up with a blended amortization on the entire purchase. I have done deals that have gone beyond 10 years with equipment involved that will last more than 10 years.

Other thing to keep in mind though is that if the equipment is vehicles, it is unlikely you are going to get beyond 10 years. If it is yellow equipment (tractors, cranes, etc.) then often this equipment has a useful life that exceeds 10 years, but most over the road vehicles do not. Also, the lender is going to likely require an equipment appraisal and look at the remaining useful life of the equipment as they are going to have to justify to the SBA going with the longer amortization. If the useful life in that appraisal does not exceed 10 years then you are unlikely to get the longer amortization done.

Happy to discuss if you would like. You can ping me here or directly at redacted Good luck.
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