Q: What banks do you recommend for SBA financed loans?
A: PPT has had a lot of success with the recommendations below. All are Preferred SBA Lenders and have conventional options available. Contact information below:
United Midwest Savings Bank: Shannon Hay, Senior Vice President, Accounting Firm Acquisition Expert
614-648-9199 (c), shay@umwsb.com
Columbia/Umpqua Bank: Kristine Crawford, Vice President, Relationship Manager
253-365-9839 (c), KristineCrawford@ColumbiaHealthcareBanking.com
LiveOak Bank: Addie Roberge, Vice President
360-510-1535 (c), addie.roberge@liveoak.bank
*Note: LiveOak does not work with physical therapy.
Q: What are the general requirements for obtaining an SBA loan?
A: The business is profitable (cashflows), or the borrower has a viable business plan including projections that show profitability within the first two years of operation. Additionally, the buyer needs to have proof of equity or liquidity to qualify.
Q: Do all banks have the same policies?
A: No. Bank policies vary drastically, and their policies are not the law. If one bank’s policies do not meet your needs, try another bank. We are happy to give you tips and tricks.
Q: What is the equity injection requirement for SBA loans?
A: The equity injection requirement is currently 10% (between buyer and seller), so each SBA preferred lender will be able to finance up to 90% of the deal. 5% equity must come from the buyer at a minimum with the remaining 5% coming from the seller in the form of a promissory note. If a buyer has 10% equity to inject, no other injection is likely to be required.
*Note: Live Oak Bank offers an ‘Expansion Program’ that allows buyers who own a practice to purchase a similar practice with no money down.
Q: How long does the financing process take?
A: On average, loan closing/funding can take anywhere from 45 to 90 days from the time all information has been provided to the bank. The turnaround time depends greatly on the buyers’ responsiveness to requests from the bank.
Q: What information will most banks require from the buyer?
A: SBA application, fully executed LOI, past three (3) years W-2’s, past three (3) years personal tax returns (all pages), year-to-date pay stub(s) if applicable, two (2) months of bank statements identifying your source of down payment, and personal financial statement. If the buyer owns 25% or more of another company, additional information will be required to include: Past three (3) years business tax returns (all pages), year-end P&L and balance sheet for the past three (3) years, year-to-date month-ending company prepared P&L, balance sheet, AR and AP aging reports, and business debt schedule to match YTD balance sheet.
Q: What information will most banks require from the seller?
A: Past three (3) years business tax returns (all pages), year-end P&L and balance sheet for all three (3) years, year-to-date month-ending company prepared P&L, balance sheet, AR and AP aging reports, prior year’s P&L and balance sheet to match date of item above for comparison purposes, business debt schedule to match current YTD balance sheet, employees’ W-2’s and YTD pay information, seller’s YTD pay stub, and 4506-T. If Real Property is being sold, all of the above items applicable to Real Property will also be required.
Q: What can Private Practice Transitions do to help with this process?
A: We have facilitated transactions where the buyer has secured up to $5 million in SBA financing. We know how to move the process along, get you to the right lender for your individual financing needs and, in general, make the process much less scary and arduous. We will work with you, and your lender, to provide all of the required information via secure file share and, in general, facilitate the process.
Q: Which bank fees are negotiable?
A: In general, only the SBA guarantee fee is mandatory. Many banks can cover other loan costs in order to earn your business. If you don’t ask, they won’t tell, so ask!
Q: What is the average interest rate on an SBA loan?
A: The Small Business Administration (SBA) sets the maximum interest that banks can charge on SBA loans. As of 2023, the current maximum interest rate range was WSJ prime + 2.75%. Depending on the size of the loan and the amount being borrowed, this rate may change.
Q: How long does the closing process take?
A: There are several factors that can speed up, or slow down, the closing process after a loan has been approved. If the parties collaborate and respond to the lender’s closing checklist in a timely manner, the closing process should not take longer than 3-4 weeks.
Q: What collateral or security will the lender request?
A: Occasionally the lender will likely ask for an “abundance of caution” lien on your home. More often, though, term life insurance naming the lender as collateral beneficiary is used. We highly recommend that you contact the below two contacts to obtain a quote for this insurance:
The Bailey Group: (o) 813-207-7512 option 4; Concierge@thebaileygp.com
Kris Schwartz: (o) 512-651-2977; (c) 210-382-1857; Kschwartz@cwsplanning.com; www.wealthcarefinancials.com
