Does the SBA give you credit for operational expertise?

searcher profile

August 05, 2024

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

Does the SBA give you credit for your knowledge and experience if you are purchasing a company in an industry in which you have operational expertise?

0
17
97
Replies
17
commentor profile
Reply by a lender
from University of California, Berkeley in San Diego, CA, USA
Absolutely. I see lenders place a high value on operational experience. The more direct it is, the better. Education doesn't seem to be terribly important to them, but experience is. Having direct experience will make it more likely you'll qualify for certain structures, such as using a seller note to cover your cash injection. While this is technically possible for any borrower per the SOP, I don't see a lot of lenders willing to do at the full 10% this unless there is industry experience. They may also be more flexible if there are challenging areas of the deal, such as a low DSCR in a previous year. Not to say that they will completely overlook red flags just because you have experience, but having experience makes it more likely you will be able to get a deal done.

A lender's job is to determine how likely it is you will be able to pay back a loan. They need to reach a very high confidence level in order to issue the loan. Having operational experience is one piece of that puzzle.
commentor profile
Reply by a searcher
from University of California, Berkeley in Seattle Metropolitan Area, WA, USA
Certainly didn't help, and was a part of the SBA commentary. But I think anyone acquiring can give significant reasons why their prior experience is additive for a new business/industry. If you can't, you'd be asked to think how it is anyhow. Support for lenders will be important as the deal goes to credit, and particularly if you're borderline in any terms / structure, it's better to be familiar than not.
commentor profile
+15 more replies.
Join the discussion