SBA Loans – How do they come into play when a business is for sale – From John LaMay

At Sunbelt Business Brokers we get inquiries about how SBA loans might influence a business sale. This often comes up when a seller or buyer searches to “sell my business”, “buy a business near me” or for those looking for lender or brokerage services firms throughout Central California. This has been heavily influenced by updated SBA loan terms after the pandemic started.   In this blog update, we will touch more on how sellers are affected.  Feel free to contact our San Jose area office about buy-side advantages, including low interest loans, waiver of SBA guaranty fees and SBA payments for the first few monthly loan payments.

PPP Loans Round 1 –

Many business owners received 1^st round PPP Loans in 2020.   Due to the overwhelming # of applicants, specialty portals were created for most applications. Some borrowers have been forgiven, although many business owners are still awaiting their lender to process or submit the forgiveness application to the SBA.  Due to recent congressional actions, SBA loan and forgiveness rules have changed, which is delaying forgiveness.  This should settle out in the coming months. Your SBA lender may approve a business sale that has an outstanding PPP loan, for example, if the Seller holds the outstanding funds (as deposit or from seller proceeds) in a separate escrow account.  Ask your SBA lender for specific Seller requirements to meet current policy.

PPP Loans Round 2 –

Many business owners have applied for or received their 2^nd round PPP loan.  Many of the smaller business owners who saw 2020 gross revenue drop at least 25% (vs 2019) for a specific quarter or the year, are expecting 2^nd round forgiveness. As with 1^st round loan forgiveness, recent congressional legislation has changed the SBA rules relating to 2^nd round PPP loan terms and related forgiveness. As with 1^st round PPP loan, this should settle out in the coming months. Similar to PPP Loans Round 1, your SBA lender will provide specific guidance (i.e. escrow account to cover outstanding loan amount) to meet current policy to where your business sale can proceed.

SBA 7(a) and EIDL Loans –

In many cases, current policy and rules generally require these amounts to be paid in full prior to Closing, thru escrow or other means.  Ask your specific Lender/SBA agent how to deal with these outstanding loans to where it does not hold up the sale or purchase of your business.  New SBA 7(a) loans have low interest, no SBA guaranty fees and SBA will pay the first few months of loan payments to support the Buyer in acquiring the business.

With over 150 offices worldwide, we are seeing many different scenarios get resolved to facilitate business deal transactions. Ask your local Sunbelt Business Broker how they can help you buy or sell a business.

now what you are getting into.

Contact John LaMay (email  [email protected]  / call (408) 757-9959 ) or  Sunbelt Business Advisors (email [email protected] / call (408) 436-1900 ) for free advice.