What SBA loan terms can you negotiate? - Searchfunder

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by a searcher from Harvard University - Harvard Business School
in Westport, CT, USA

2mos ago

What SBA loan terms can you negotiate?

What terms of an SBA loan can you negotiate? For instance can you negotiate down the interest rate or the closing costs, add interest-only periods, etc? If so, what is the art of the possible in today's market?

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reply by a lender 2mos ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Evan, the basic terms of SBA 7A loans are set. Those include the term of the loan (based on the type of collateral and use of loan proceeds), the required minimum down payment (10% standard and 5% with a seller note for 5% of more of the transaction on standby for the life of the loan), rate range if a variable rate from Prime to Prime plus 2.75%, and other standard underwriting requirements. Lenders typically do not negotiate most of the loan documents and closing conditions are pretty standard and required by most lenders. You can definitely negotiate the amount of working capital you plan to get, possibly some interest only period on the front-end of the loan, and of course the total loan amount depending on what costs are included in the loan. Although the interest rate is certainly important when you go to pick a lender, understanding the other lender underwriting requirements and their process and timing is also very important. You want to be sure you have a lender that can actually back up the term sheet they have offered and can get the deal done. You also want to be sure your deal meets their internal underwriting requirements, which can be quite a bit different than the requirements in the SBA Standard Operating Procedure. Also, there is the possibility of securing a fixed rate from some SBA lenders, but the deal has to be very strong to qualify for that. I would be happy to connect and discuss financing options at any time. We offer a free review of transactions you are looking at and can help you figure out structure and what will and will not work pre-LOI. You can reach me here or directly at redacted

reply by a searcher 2mos ago
from The University of Chicago in Sacramento, CA, USA

Friends that have closed self-funded deals have told me they see a range of ~200bps between term sheets so not an insignificant difference. They haven’t mentioned negotiating so much as shopping the deal to additional lenders to see the range. Another piece is to understand is whether the lender you’re working with is going to hold the loan or resell it, since that can have impacts on who you’re dealing with down the line.

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