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How much captiol do I need to procure an SBA 7(a) loan?
I am considering applying for an SBA 7(a) loan to purchase an existing business. I would be asking for $80K to $140K. How much personal capitol I will need to provide to secure the loan?
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Posted on
Jan. 27, 2010
Dear Justyn - Thanks for your posting question to www.focus.com.
I found an excellent 5 page reference which explains all the various rules and answers most questions.
The link is as follows:
http://www.sba.gov/idc/groups/public/documents/sba_homepage/recovery_act_faqs...
I hope you find this helpful!
Best of luck in securing a loan.
Steve
Steven J. Elliott, CPA, MST, MPFP
Senior Tax Manager
Janover, LLC
Garden City, NY 11530
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Justyn,
Hopefully, this will be useful so you do not have to look anything up. The amount of the equity injection by the Borrower (in this case you) depends on the type of business you are acquiring and the level of risk associated with it. Most often, the Borrower is required to inject 20%. However, restaurants are considered much more risky and require 30% or more.
Assuming you acquire a non-restaurant related business and it provides adequate cash flow to satisfy the proposed debt service, then you'd only be required to inject 20% of the TOTAL PROJECT COSTS.
For instance:
Purchase Price $100,000
Working Capital + 20,000
PROJECT COST $120,000
20% Borrower Injection - 24,000
AMT FINANCED $96,000
I hope this information is helpful. As a former commercial lender, I am an SBA lending expert. I currently assist my commercial clients and prospects all over the US in their goal to obtain commercial financing. Feel free to contact me with any other questions you may have. Please let me know if I can guide you through the process and identify the appropriate lender for you.
Terri Bollman-Wyzkoski, President
Business Lending Solutions LLC
www.BusinessLendingSolutionsLLC.com