Getting SBA loan to buy a business, franchise, or professional practice is one of the most important aspects of buying a business. Very few buyers have all cash for a purchase and not many business owners are willing to take back a large note.

Lenders look at lots of different things in both the buyer (borrower) and at the business, franchise, or professional practice that is being purchased. Here are a few things that can determine whether you will receive SBA loan financing to buy a business.

1. Buyers need to have a credit score of over 600. Personal or business bankruptcies or many late payments will usually disqualify (unless the BK has been discharged) the borrower no matter how good the other borrower criteria appears. Fix any problems you may have well before the buying process. Early in the lending process, the lender will be running a credit check to see if you qualify and if the debt service can be serviced by the business cash flow.

2. Lenders like borrowers who has experience in the business they are wanting to buy or experience in a similar field, or with specific job skills related to the business they are buying. Also management experience or buyers who have previously owned a business (self-employment) and know what it takes to grow and keep a business on track is a plus. You will need to provide a resume or description of your work experience. Have one ready that focuses on your industry strengths and management experience.

3. History of earnings (revenues) both total annual revenues and adjusted net income should either be flat or growing over the previous three years (no one wants to finance a business on a downward trend). If a downward trend is indicated in earnings over the previous three years there must be a very good explanation or financing will probably not be approved.

4. Positive cash flow (or adjusted net income) must cover the debt service of the loan and provide you with an adequate income to live on, otherwise you won't get the loan. Tax returns of the business being sold will be looked at closely - so if the seller is playing any games (not showing income, excess deductions, etc. on his business tax returns) chances are you won't get financing. During the early stages request the business tax returns of the business your considering and see if you can "add back" sufficient net income, depreciation, interest, and owners salary (adjusted net income) to pay back the loan.

Here are the highlights of our SBA 7a Loan Program:

Loan Purpose: Acquisition, expansion, construction, recapitalization, business buyout,machinery and equipment purchase.