Buying a Restaurant with SBA lending is a great opportunity for buyers to finance up to 90% of the total acquisition cost. Restaurant Acquisitions are eligible for Small Business Administration (SBA) 7(a) loans, but the process can be time-consuming and requires many supporting documents.
The restaurant buyer’s and the restaurant seller’s financial documents must be approved for bank lending. Both parties have different duties during the due diligence process for SBA bank lending.
Buyer Documents required for SBA lending:
-Last three years of personal federal tax returns and W-2’s
-Copy of Asset Purchase Agreement or Letter of Intent (LOI)
-Business Plan
-SBA Form 1919-collects information about the applicant
-SBA Personal Financial Statement is known as form 413
-Professional Resume
-Credit Authorization for the lender to obtain a credit report
-Business license and registration
-Copy of current commercial real estate lease(if not buying the building)
-Collateral-is needed for most loans but not all
-Proof of Buyer’s Equity Injection 10%-20% required-can be gifted funds if it doesn’t have to be paid back to the original source.
*Depending on the buyer, SBA will only require a 10% equity injection from the buyer. This injection can be made in various ways. The buyer can provide the entire 10% equity or 5% seller financing and 5% buyer down payment.
Seller Documents required for SBA lending:
-Recent three years of business federal tax returns
-Current Profit and Loss Statements and Balance Sheets
-Broker’s Price Opinion or Confidential Information Memorandum
-4506T form-request for transcript of tax return directly from the IRS
-Bank statements can be requested
The U.S. Small Business Administration (SBA) doesn’t provide business loans, but partially guarantees loans that banks and other lenders make to small businesses. By partially guaranteeing the loan, they will eliminate some risk and encourage lenders to make loans to small business owners.
Buying a restaurant with SBA lending is
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or by email at [email protected]. Visit our website at www.EATSbroker.com
