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New SBA 7A Loan Program Will Help Key Employees Buy a Business

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in The Business of Business Finance

There is plenty of criticism for the new stimulus bill now working through Congress as you can read here, here and here.  I have even commented that much of the rhetoric about helping small business owners access capital has been more politically motivated than practical.  However, there are aspects of this new bill (SBA News Release) that will help key employees buy their business and create a new pool of potential buyers for owners anxious to sell their company.

We often help business owners follow an effective exit planning process to sell their company.  For many owners, the idea of selling to key employees is often desired but seldom a viable alternative due to the lack of capital and very limited access to SBA lending.  The SBA's 7A loan program is often out of reach because they require at least 30% equity or down payment from the buyer.  The American Recovery and Reinvestment Act not only provides $375 million for temporary loan fee reductions, it effectively reduces the down payment/equity requirement to just 10%.

Forward-looking business owners who engage in exit planning 1-5 years before they actually sell their business realize these new SBA loan changes will create a new and potentially large pool of executives, key employees and first-time entrepreneurs who are now viable candidates to buy a business, even without substantial personal net worth.

Although this may not be a primary objective of this stimulus bill, for business owners who are now able to sell a business to key employees, it will be a very welcome result nonetheless.

{ 1 comment… read it below or add one }

Mba Business August 12, 2010 at 6:41 am

This is a wonderful opinion. The things mentioned are unanimous and needs to be appreciated by everyone.


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