SBA Pre-Deal Lending

searcher profile

December 18, 2022

by a searcher from Emory University - Goizueta Business School in Atlanta, GA, USA

Hi All - I am new to this platform / search and interested on if getting pre-approved for a SBA loans early on is A) possible and B) valuable?

My thought is this is good step to get out of the way early and will help to understand my buying power....

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Reply by a lender
from California State University, Sacramento in Auburn, CA, USA
Shan, it is always a good idea to talk with an SBA lender, or three, before pursuing the purchase of a business. However, "prequalifying" you as a buyer is very difficult and often not worth the paper a prequalification letter is written on. The reality is, 70% to 80% of our lending decision in a business acquisition request is based on the seller's business, its adjusted cash flow, revenue/expense trends, industry, location, history, to name a few. Yes, you as a buyer are important to the transaction but the business you are purchasing is often more important to the lending decision. What you glean from getting "buyer prequalified" is a general overview of what is needed/required/expected, what a lender is looking for, etc. If you have the necessary down payment/cash investment, additional liquidity for working capital purposes (post acquisition), industry/transferable management experience, and acceptable credit, you likely have what it takes to buy a business and are therefore "prequalified" to do so. Most business brokers don't ask for a lender prequalification letter but having one cannot hurt either! It shows you are proactive, have done some preliminary homework, and are likely a serious buyer (not a tire-kicker). Having a completed PFS form and Managment Resume available for a business broker is very important and shows seriousness. Cheers and good luck, Robert
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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Shan, I would definitely recommend talking to someone to be sure you understand the lending process. Although I agree with Robert that a pre-approval does not mean much up front, unfortunately some brokers do require something indicating someone has reviewed your financials and you have the money to put down and reasonable credit. I would be more than happy to talk with you at any time about what is involved in the process. We are a commercial loan brokerage shop with roughly 500 funding partners with many SBA partners. You can reach me directly at redacted
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