The last quarter of the year is a time for strategic planning for the next year and with this preparation comes a chance to ensure future business buyers have a good understanding of their opportunities for 2018. So with that, we would like to address the changes in the Standard Operating Procedures for the Small Business Administration’s (SBA) loan program that will be put into effect on January 1st, 2018.

There are a few changes of note to address. The first change is that all loans will require a 10% equity injection (i.e. cash payment). This requirement will replace the original down payment parameters of 15% or 25% equity injection. The second change, is that the 10% down cannot be serviced by a seller note unless it is on full standby for the life of the SBA loan. The third change is that to receive SBA funding for the purchase of a franchise business the franchisor will need to be registered with the SBA Directory.

So how do these changes affect you? From the sell side, this opens up more business purchase opportunities for buyers, thus making their businesses more accessible.The new SBA changes can potentially allow for the immediate amortization and repayment of seller debt. From the buy side, buyers who cannot put a large amount of equity down can potentially qualify for more financing opportunities with a smaller down payment. The down payment can also be serviced with a seller note with the requisite deal structure. Franchise buyers will need to check the SBA Directory prior to seeking SBA funding for a franchise purchase.

Even though these changes overall open up SBA loan financing, each transaction is different and may still require a larger down payment to make the deal structure work or because it is in the best interest of the buyer.

*The information described herein was gathered with the support of Wells Fargo, the SBA Form 1353 as well as our knowledge. Transworld Business Advisors of Colorado does not claim to be a finance or banking institution.