Why do some sellers dislike the SBA?

by a searcher from Towson University

2 years ago

Recently saw a business for sale where the owner is willing to carry up to a 50% note, but would not accept an SBA loan for any portion of the purchase. And this is a hard sticking point....

Being that I've never actually closed a deal, I'm hoping someone with SBA experience on the buyer/seller side can help me figure out what is the sellers motivation here. Is it to avoid a lengthy closing? Does he want an annuity from the sale? Is this typically a red flag?

I'm early in my underwriting days and just trying to understand the big picture here, so any thoughts or musings are welcome.

What are some creative ways to either make a cash offer, delay financing, or structure something more palatable with the seller to get past this?

1 like
321 views
20 comments

searcher from Wabash College

In my opinion, the extended closing time and underwriting hurdles frustrate a lot of owners that know their business but don't know how to explain their business clearly from a credit perspective. Definitely weird to take a 50% seller note, but not a major red flag/disqualifier

2 years ago | like reply | 0 likes

professional from University of Southern California - Marshall School of Business

Given the useful insights among the commenters, why not explicitly (and tactfully) ask the owner to tell you the reasoning for the owner’s position? The pros and cons? It would be a good idea to know who the owner’s transaction advisors are. Lots of deals fall apart because the seller has incompetent advisors, or there’s a conflict of interest among the advisors and seller .

2 years ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Sorry, but you are a broker's worst nightmare ... and how to fix it

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.