SBA Can’t Touch the Speed of Execution!
EXECUTIVE SUMMARY: Michael and Nancy used an SBA loan alternative for business acquisition financing to purchase an existing cinnamon roll franchise in Arizona, closing just two weeks after all required documentation was received.
Michael and Nancy wanted to build a legacy for their blended family of nine. It had not been an easy road, and they believed purchasing an existing franchise could change the trajectory of their family’s life.
Their plan was straightforward. Nancy would operate the business while Michael kept his current job, which provided the family’s insurance and other benefits.
Why This $200K Acquisition Needed an SBA Loan Alternative
Michael and Nancy found an existing cinnamon roll franchise in Arizona that was performing well and decided to move forward with the purchase.
Finding the right business was not the problem. Finding financing was.
Many banks are not interested in a $200,000 business acquisition loan because the underwriting and closing process can require nearly the same amount of work as a much larger transaction.
Selling a smaller loan in the secondary market may also fail to generate enough income for a bank to justify the cost of processing it.
Why spend the same amount of time underwriting a $200,000 acquisition loan when a $3.5 million loan may require a similar process?
That is one of the biggest challenges buyers face when seeking SBA financing for smaller business acquisitions.
In fact, this opportunity was referred to us by a bank that did not want to pursue the transaction for that exact reason. I do not blame them.
The Non-SBA Business Acquisition Financing Solution
We had a solution.
The Non-SBA business acquisition financing program we facilitate is designed for qualifying business purchases of $375,000 and under. It provides an SBA loan alternative for business acquisition transactions that may be too small to receive attention from traditional banks.
The financing also did not require outside collateral or a lien on Michael and Nancy’s home.
That made it a strong fit for this smaller franchise acquisition.
The Franchise Acquisition Closed in Just Two Weeks
Once all required documents and financial information were received from the buyers, seller, and other parties, the financing closed in just two weeks.
The process moved so quickly that the closing actually had to be postponed while Michael and Nancy waited for the landlord’s approval.
On a qualifying transaction of this size, that is a level of execution the SBA process would have struggled to match.
What This Deal Shows Business Buyers and Brokers
Smaller business acquisitions can have difficulty gaining attention from traditional banks because the amount of work involved may be similar to a much larger transaction.
An SBA loan alternative for business acquisition financing can provide a faster path to closing when the purchase price and borrower meet the program’s requirements.
For Michael and Nancy, that alternative helped them complete a $200,000 franchise acquisition and take an important step toward building a legacy for their family.
Ready to See if Your Deal Qualifies?
If you have a business or franchise acquisition that may need an SBA loan alternative, let’s talk.
FAQ
What is an SBA loan alternative for business acquisition financing?
An SBA loan alternative for business acquisition financing is a conventional financing option used to purchase an existing business without relying on an SBA-guaranteed loan. These programs may be a better fit for smaller acquisitions that banks do not want to process through traditional SBA channels because of the time, cost, or loan amount involved.
Can a $200,000 business acquisition loan close faster than an SBA loan?
Yes, a qualifying $200,000 business acquisition loan may close faster through a conventional Non-SBA program. In this case, the financing closed in two weeks after all required documents and financial information were received. The actual timeline depends on the borrower, business, seller, documentation, underwriting, and any third-party approvals.
What size business acquisitions qualify for this Non-SBA program?
The Non-SBA business acquisition financing program discussed in this case study is designed for qualifying acquisitions of $375,000 and under. It may be a strong option for buyers purchasing smaller existing businesses or franchises that traditional banks consider too small to justify the full SBA underwriting and closing process.
Does this business acquisition financing require a lien on my home?
This program may not require outside collateral or a lien on the buyer’s home. In Michael and Nancy’s transaction, the financing was structured without placing a lien on their residence. Final collateral requirements depend on the specific acquisition, borrower qualifications, business performance, and the terms provided by the funding source.
Can this financing be used to buy an existing franchise?
Yes, this type of financing may be used to purchase a qualifying existing franchise. Michael and Nancy used an SBA loan alternative to acquire an operating cinnamon roll franchise in Arizona. The business still needs to demonstrate acceptable financial performance, and the buyers must meet the funding source’s experience, credit, liquidity, and documentation requirements.