Question – I am interested in purchasing an existing, successful business from my current employer. I have talked with my bank and even though I have cash to put into the deal, his concern is the lack of collateral. The current owner is retaining and then renting the business real estate and business equipment is minimal. Since this is essentially an unsecured request, would an SBA Advantage 7a work?
Our Response: SBA’s written policy regarding collateral has two parts:
Most small businesses are eligible to receive SBA loan guarantees, however common ineligible applicant cases includeThe applicant not qualifying as a small business.- Link to SBA size standards
Given the information provided, the SBA Advantage 7(a) sounds like an appropriate program given the lack of collateral. You may also want to talk to the seller about the possibility of seller financing to offset the lack of collateral as a backup should the SBA not approve guaranteeing the entire loan.