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SBA loans for business buyers

An SBA loan can be used for a variety of purposes including the acquisition of materials, property or equipment of an existing business. Although the SBA's guarantee is a powerful incentive, SBA lenders don't take the approval process lightly. Buyers still have to adhere to an assortment of criteria if they hope to get a green light.

Financial requirements

Right off the bat, an SBA lender wants to make sure the borrower meets certain financial requirements. If the borrower's credit rating is less than stellar, there are a couple of options. First, the borrower can review his credit report and work with previous lenders to remove items that have a detrimental effect on his overall score. Although lenders are generally willing to work with borrowers to clear their report and improve their rating, the borrower will probably have to make some progress before the report will improve enough to make a difference.

Another option is for the borrower to simply delay the purchase until he can demonstrate a trend of positive borrowing. This could take a while, but if it makes the difference between getting a loan and not getting a loan, the time will be well-spent.

Yet even the most immaculate credit rating won't be able to help a borrower who isn't able to come up with the minimum downpayment. SBA loans typically require a downpayment in the 10% to 30% range, depending on the type of collateral the borrower is able to offer as security for the loan. Since an adequate downpayment can represent a big chunk of change in a business purchase, it's not uncommon for buyers to beg, borrow and steal (OK, maybe not steal) it from the equity in their homes, their retirement programs or even relatives.

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