As you may or may not know, the SBA does not lend funds to anyone, for the purpose of purchasing Businesses.  Banks actually lend the money, while the SBA provides insurance of sorts, that it will put up to 80% of the amount loaned, should the Business fail.

This is a crucial thing for Business people to understand, for a couple of reasons.  First, it is important that any Buyer understands that he/she is going to need to qualify with both the Bank and the SBA.  It is a two-tiered process.  SBA Preferred Lenders are financial institutions that essentially make all the decisions right there at the Bank, because the SBA has given them permission to qualify once, according to the SBA’s guidelines and regulations.  Even though there is this two-tiered process, if the Buyer is dealing with an SBA Preferred Lender, it is not as though the application needs to be physically reviewed by the Bank, then processed over to the SBA for a second series of delays and qualification at another location.  With Preferred Lenders, all the qualification work is done at one time, and in one place.  There are multiple players involved, but it still streamlines the process.

That still does not mean that the two-tiered system is a piece of cake!  We were in the process of selling a very large Liquor Store, and the Buyer decided he wanted to use his own Bank – which certainly he has the right to try to do.  The Bank was a Preferred SBA Lender, but after five months of waiting, still had not given the Buyer a decision.  All they kept saying was, “This is a great deal!”  The Seller was obviously frustrated and demanded an answer, one way or the other, or he was going to terminate the contract.  The Buyer confronted his Bank, and after five months of jerking him around, the Bank, finally said, “We are sorry, but we do not lend money for the purchase of Liquor Stores!”

This was not an SBA decision.  This was strictly the bias of the Bank’s own Portfolio Manager, simply because she was personally, morally opposed to anyone drinking alcohol.  The Buyer happened to have a great deal of money on deposit in that particular Bank, and though the Bank did not want to lend him funds for the purpose of purchasing a Liquor Store, they delayed the process for five months because they did not want to decline him, and have him leave the Bank in anger!

When the Buyer told us about we immediately put him in contact with another SBA Preferred Lender with which we had worked on several occasions, and the deal was completely funded and settled in 45 days.  Once again, it had not been the SBA that was the holdup.

Many Business Sellers do not like the idea of selling their Businesses to someone who was going to use the SBA, to obtain funding for the acquisition.  Unfortunately, unless the Buyer has several hundreds or millions of dollars stuffed in his/her mattress at home, there is no other way to obtain funds to purchase a Business.  Commercial Banks will not do that, with Small Business purchases.

We are regularly asked by Sellers if we can find an “all cash” Buyer.  Sometimes, this can be done.  When we sell a Convenience Store, a Gas Station Dealership or other types of businesses, perhaps priced up to his much as $250,000, there are some circumstances where we find people with those kinds of funds.  But frankly, even if someone has $250,000 in their checking account, in most cases they would prefer to leverage that money by using it as a down payment and ultimately purchasing a Business for perhaps $750,000 or more, with an SBA loan.  It simply does not necessarily make good economic and financial sense to spend all of one’s money in buying something for cash, in that manner.

The resistance that Business Sellers have to the SBA comes from their fear or concern that such loans take an inordinate amount of time.  Buyers hate the thought of using the SBA because they say it requires a mammoth amount of paperwork, in order to complete the application.

But the truth of the matter is that the SBA does not take a huge of time, if the applicant or his/her Broker or CPA knows how to complete the forms in an efficient manner.  The vast majority of delays with SBA loans are because the application is provided inaccurately or incompletely.  When the Bank or SBA has to go back and forth with the Buyer in attempting to get the information done correctly, it will naturally take a tremendous amount of time, because the SBA and Banks are both bureaucratic institutions.  Because of the way we package SBA loans, we would normally get them through in about 45 days or even less; it can take a little more time if the purchase includes Real Estate.  Such a delay of that type is normally due to scheduling issues for Real Estate Appraisals and/or Environmental Surveys.

From the Buyer’s side, yes it does take a fair amount of paperwork, in order to complete the application.  But we are always amazed when people say that.  Do Buyers really believe that a Bank or the SBA is going to provide $500,000 or $1 million in loans, without any such documentation?  Without being asked specific questions about their ability to handle the funds?  About the ability of the Business to make timely payments?  Why does this seem so unreasonable?

Business Sellers, please do not fear the SBA.  Do make certain that the Buyer and/or the Brokers involved are knowledgeable in the application process, so as to have the best probability of a positive result, in the most efficient manner possible.  Ask where the Buyer plans to obtain his/her loan, and make certain that the Bank used is a Preferred SBA Lender.

And for your part, make certain that your books are in pristine shape.  Make certain that your Corporate Tax Returns are up to date and that you have signed copies of them for the Buyer to take to the Bank.  The Bank will want to see the last three (3) years of Company Tax Returns, plus current Financial Statements, (Profit and Loss Statements, and current Balance Sheet); they should be no more than 45 days old.  If you take a paycheck, principally because you are an S Corp. or a C Corp., you should include your W-2 forms, for each of the Tax Returns you provide.

When you think about it, none of these things are unreasonable requests.  All of these things can be done efficiently, particularly if you know about them in advance.  Your Broker or CPA should be able to take you through this process, very quickly.

Keep in mind one other thing:  Without the SBA, the only way to sell your Business is for you to act as the Bank, and take a note for the majority of the sale price.  Suddenly, the SBA looks pretty darned good, and doesn’t it?

(The BAF Group LLC is a full service Business Brokerage, with a history of more than a decade of service. Its Principal Broker possesses 25+ years of Business Sales and Divestiture. Although most of our work is involved in the Mid-Atlantic States, we have represented Sellers and Buyers throughout the Continental USA, and a number of overseas Buyers, as well. Some of our listings and additional information about us can be viewed at Or, you may contact us at Thank you for your interest.)