Most sellers want their business to change hands as quickly as possible, but things don’t always go as planned. However, there are certain steps of the process that you have the power to shorten, like the rate at which the buyer’s loan is approved.
Unless your buyer plans to pay cash, they will likely need to obtain a small business loan through the Small Business Administration (SBA). The SBA does not loan the money directly, but when you apply for an SBA-backed loan, you are essentially asking the SBA to provide the guarantee that you will repay.
SBA loans are more flexible than other types of loans. However, lenders still require lots of documentation and plenty of time to review each application before the money is in your hands. This can be a lengthy process, especially if you’re working with a lender that isn’t SBA-preferred.
Working with an SBA Preferred Lender
For small business owners, time is money, so it’s a good idea to expedite processes where you can. One way to do it is through the SBA’s Preferred Lenders Program (PLP). For banks who participate in this program, the SBA allows the lender the authority to make the final credit decision in-house. If you choose a non-SBA-preferred lender, they must outsource your loan to the SBA for approval, lengthening the processes. This can add up to four additional weeks.
Here are five benefits to working with an SBA Preferred Lender:
- You won’t have to wait as long from when you apply for a loan until the time it’s approved.
- PLP banks have more experience working with SBA loans, so you can expect fewer snags.
- Banks who work with the SBA can make loans that other banks wouldn’t be able to make to small business owners.
- Loans from PLP lenders tend to have more relaxed repayment terms, lower minimum payments and, except on commercial real estate, no prepayment penalties.
- Loans from SBA preferred lenders allow you to start a new business, purchase an existing business, or purchase commercial real estate with as little as 10 percent down.
If you need help choosing a PLP lender to work with, contact The Bridlebrook Group online, or call us at 610.325.7066.