#7 The Role of Experience

Number seven on the list the borrower does not have the requisite experience

SBA Loans made by SBA Lenders which are the predominant type of loan for the purchase of a business want direct experience in the industry as well as previous ownership in the same field.  There is one exception though where the lender will apply any retail experience to another type of retail store.

For example if you owned a shoe store and you wanted to purchase a hardware store the lender may see that as direct experience.  However if you are an engineer and you  wanted to buy a Chiropractic practice even though you are an owner of a previous business that experience would not be transferable.

In addition many businesses in the professional area need a license to run the business, so if you are not licensed they will not lend you the money to buy the business.  For example a non-broker could not purchase a Real Estate business,  likewise an individual who wants to purchase an insurance agency could not buy one without the proper insurance licenses in place.
Does management experience in the same industry qualify as experience to purchase a business?

Today probably not,  Ownership interest is drastically different than management experience.  As a manager all you need to do is run the day to day business.  As an owner you have to handle all of the management as well as the ownership responsibilities such as paying taxes, filing financial reports, hiring and firing employees and making decisions that are directly related to the overall finance status of the business.

Experience is also becoming paramount for the purchase of commercial investments as well. I have written an article that will be published in the Scotsman Guide in March that looks at experience in great detail.

For the role of experience please see our book GET Your Loan Closed!, and with purchase we are including free weekly commercial loan training.