I had a client reach out to me the other day asking whether it was normal to hear nothing from their SBA lender for 4 weeks after submitting a loan application.
Although that might be “normal-ish” that probably isn’t a good sign that the lender is excited about your loan and going to help get it to the finish line. There could be 100 reasons for this, but almost all of the reasons are probably a bad sign.
For this particular client I suggested checking out our free SBA Lender Tool to find an SBA Lender that seems to have a history of making loans in their state and industry.
But this got me thinking, many of the small business acquisition deals that we help folks create financial projections for are actually quite small. One client that I was helping today is looking to acquire a small medical practice for $300,000, but the seller is providing financing for half the purchase price, and the client has $75,000 to invest into the deal,so they really only need an SBA loan of $75,000 to close the deal + maybe a small line of credit.
The unfortunate reality is that isn’t going to excite too many SBA lenders. There just isn’t much interest or fee income to be made on such a small loan, and it is just as hard to close the deal as a $750,000 loan (10x bigger).
I spent over a decade working as an SBA Microlender where we made loans for less than $250,000. We closed many, small acquisition loans over my decade there. All SBA Microlenders and CDFIs are non-profit organizations that are mission lenders trying to help small businesses that are underserved by traditional banks.
If you are struggling to find a lender to help with your small acquisition, and if you acquisition is less than $500,000, I think you could really benefit from talking to a Microlender or CDFI. Here are a couple of resources:
Find an SBA Microlender in your area.
Find a CDFI Lender in your area.
Not every microlender or CDFI is going to be a magic bullet, some are better than others, but for a traditional bank, you can be assured that a $75,000 acquisition loan is going to be one of the smallest loans they would be willing to do, whereas for a microlender this could be one of the largest deals in their pipeline which probably means you are going to get more attention.
If you are struggling to find a good lender to work with let me know I might have some ideas for you.
Until next week,
Adam
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Follow Adam's acquisition journey and learn how to buy a business the smbuyer way.
Do you have any good niche business stories that have been crushing it because they offer a very niche service?
Does this seem like it could provide value and fill a gap that doesn’t already exist in the market, or am I just drinking my own Kool Aid here?
I will always remember walking into my 11th grade math class and the white board just said “Ass U Me.”