How to Use SBA Financing to Acquire a Business

How much does a Buyer need to put down? What is the structure of the deal?

Loan Purpose:        Acquisition Financing for Buyer of a Successful Auto Repair & Service Business

Purchase Price           $600,000

Estimated SBA Fees    $11,000

Total Costs                    $18,000 (Bank & SBA fees can be financed into the loan) 

Buyers Equity (15%)    $90,000 (Buyer puts up $90,000 of their money at closing)

Seller Note (10%):        $60,000 (Note: Standby note with the seller at closing for 2 years & subordinated to Bank)

SBA 7A Term Loan:     $468,000

Term:                              Ten Years - No Pre-pay Penalty

Rate:                             6.75%   (Note: Interest rate is variable adjusting quarterly)

Monthly Payment:     $5,374(Variable to Prime Rate)   

Fees:                             Bank Fees, SBA Guaranty Fees & Attorney Costs

Security:                      Blanket first lien UCC position on all business assets of borrower (buyer).