Financing the Sale of Your Business 

Generally, there are two forms of financing for the sale of a business, 1) an SBA loan or 2) a Seller Note. The combination of both is used quite frequently. 

While every business owner’s dream is to sell their business for “cash”, few transactions are sold for all cash, other than for very small Mainstreet businesses.  With that said, is it possible to get all cash at closing for the sale of your business?  The answer is yes if it qualifies for SBA financing.  

SBA financing is the preferred method of financing at Pacific Business Sales and 90% of our transactions utilize SBA financing.  We have long-term and close relationships with a select group of SBA PLP (Preferred Lending Program) banks we work with on our transactions. 

Why SBA Financing is a Great Deal for Buyers & Sellers

We love SBA financing for a number of reasons, first and foremost, the SBA will finance up to 90% of the business acquisition (if it qualifies).  This means a buyer can purchase a business for just 10% down and finance the rest over 10 years at prime + 2.75% (6% as of November 2021).  With a 10-year term, and a low-interest rate, this improves the Net After Debt Service cash flow making the business very attractive for prospective buyers.  The low down payment of just 10% also opens the pool of prospective buyers to many more buyers.

As an example, a buyer purchasing a business for $1,000,000 would be able to buy it with just $100,000 down and the seller would get $1,000,000 at closing (less closing costs).  In many cases, the SBA lender may require the seller to carry a small seller note of 10% of the transaction value resulting in the seller receiving 90% of the transaction value at closing (less closing costs).

This type of financing structure puts the business within reach of more buyers and makes it much more attractive than businesses with no SBA financing, requiring all cash, or Seller Financing which is more expensive.