2023 Update: SBA Loans for Business Expansion
In a bid to stimulate business growth, the #SmallBusinessAdministration (SBA) has officially affirmed that no equity infusion or #SellerFinancing is mandatory when purchasing a company that shares the same NAICS code as the buyer's current business in the same geographical area. The recent revisions to the SBA 7(a) loan program herald promising opportunities for both buyers and sellers. The incorporation of partial buyouts, greater adaptability in equity injection prerequisites, and the acceptance of seller debt as a viable financing alternative embolden entrepreneurs to approach business acquisitions and expansions with enhanced confidence. While a few lenders previously provided this choice, the SBA's formal integration of this policy into its regulations is poised to encourage a broader spectrum of lenders to embrace this approach, thereby broadening the horizons for entrepreneurs seeking to expand their enterprises.
The SBA specifically states: When an existing business acquires a business that is in the same 6 digit NAICS code with identical ownership and in the same geographic area as the acquiring entity, SBA considers this to be a business expansion, and SBA will not require a minimum equity injection. Source: SBA.gov
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