Prequalifying a Property or Business for an SBA Loan

As I shared with you yesterday I want to bring to light real examples of  what we deal with everyday. For instance I got numerous calls from brokers  asking us to pre-qualify their property or business opportunity for an SBA Loan.

The issue that is immediately raised is that unlike a residential loan where a client is pre-qualified for the loan, there is really no way to prequalify a commercial transaction until both buyer and seller have been identified. A commercial property as well as a business opportunity have to cash flow and support the loan amount. To determine if a property cash flows is simple enough; collect three years worth of tax returns, profit & loss statement, and balance sheet as well as interim financials. After we have all the data by applying our loan modeling software we can determine how much loan the business can support.

So in essence we can say with certainty that a business qualifies to be eligible for SBA Financing, but until we factor in the buyers down payment, credit, collateral, capacity to serve the debt, character and personal needs, as well as buyers actual experience we cannot say that the business can be sold to that particular borrower.

For a commercial loan non-SBA we would look at the income the property produces to determine debt service coverage ratio and then the buyer would be analyzed the same way as for an SBA Loan, including experience of ownership of other similar type investments. Also post-closing liquidity is focused on more with a Non-SBA Loan.

All of the above is carefully examined in our book GET Your Loan Closed! and for a limited time we are including FREE Commercial Loan Training.