Think Big, Buy Small
The Fantastic Economics of SBA Loans
Jul 29, 2024
Heather Endresen, an expert in SBA lending and owner of Viso Business Capital, shares her decades of experience. She highlights the extraordinary benefits of SBA loans for first-time business buyers, including favorable terms and flexibility compared to conventional loans. The discussion dives into personal guarantees, the importance of structuring loans wisely, and the process of navigating defaults, especially in challenging times like the COVID-19 pandemic. Ideal for anyone considering entrepreneurship through acquisition!
47:46
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Quick takeaways
- SBA loans enable acquisition entrepreneurs to purchase businesses with as little as 5% equity, offering favorable terms over conventional loans.
- The requirement for a personal guarantee in SBA loans poses significant risks, but can be negotiated in times of borrower hardship.
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Advantages of SBA Loans
The Small Business Administration (SBA) Loan Program offers significant benefits for acquisition entrepreneurs, primarily its generous loan terms that require minimal equity investment. Entrepreneurs can borrow up to 90% of a business's value, allowing them to acquire a company with as little as 5% equity if structured wisely with seller notes. The loans also feature a longer repayment period compared to conventional loans, typically allowing ten years for repayment without the inclusion of restrictive covenants. This combination of low equity requirements and flexibility in terms makes the SBA loans highly appealing for first-time business buyers.
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