What's New in SBA Financing? [June 2023]

What's New in SBA Financing [June 2023]

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The podcast episode discusses recent changes in Small Business Administration (SBA) financing guidelines. Some key changes include the allowance of partial ownership changes, where sellers can sell a portion of their equity while retaining a stake in the business. Previously, a complete change of ownership was required.

The changes took effect on May 11, 2023, with additional significant changes scheduled for August 1, 2023. Another change is the reduction in the duration sellers need to stay with the company after selling it. Previously, the maximum period was 12 months, but now sellers can stay on for as long as they desire.

The new rules also impact seller contributions toward the down payment. Previously, sellers could leave up to five percent on standby for the loan term. However, the changes reduce the standby period to two years. Additionally, the personal liquidity rules have been revised.

The changes have both benefits and concerns for lenders. Introducing zero money down options raises concerns about potential defaults and increased risk for lenders. Congress has also expressed concerns about the new rules and the associated risks.

The episode suggests that business owners, buyers, and brokers should stay informed about the changes and work closely with knowledgeable professionals who can help navigate the new SBA loan rules.

Timestamps:
(00:02) Overview of the episode topic about the changes in SBA
(00:47) What were the guidelines in the past regarding partial changes of ownership in a business?
(01:12) Explanation of the possibility of selling a partial interest in a business under the new guidelines.
(01:36) Speculation on the reaction of lenders to these changes and the potential for 100% financing deals.
(01:54) When do the changes discussed take effect?
(02:09) What were the rules regarding seller contributions toward the down payment in the past?
(02:14) Previous rules regarding seller contributions toward the down payment.
(02:58) What was the requirement regarding the seller’s duration of staying with the company after selling it in the past?
(03:33) The possibility of purchasing a business with zero money down.
(04:21) The changes regarding personal liquidity rules and eliminating the credit elsewhere test.
(05:02) Discussion about the SBA directory and its impact on lenders.
(06:14) Speculation on the use of the SBA directory by lenders despite it no longer being updated.
(06:36) The potential effects of the removal of the SBA directory.
(07:09) Increased opportunities for franchises and the need for prudent lending.
(07:36) Lenders' Concerns regarding the new SBA loan rules and potential risk factors.
(08:38) Reflection on balancing helping small business owners and managing risk.
(09:30) How the new rules can benefit key employees looking to buy a business.
(11:15) Recommendations for business owners, buyers, and brokers to navigate the new SBA loan rules.
(11:58) Emphasis on learning, asking questions, and working with competent bankers to navigate SBA deals.
(12:58) The interpretive nature of the SBA guidelines; the importance of making deals that make sense.
(13:25) Importance of collateral and compensating factors in deals and the role of projections and business plans.
(14:20) Strengthening deals with value-add opportunities.
(15:02) Recommendations for networking with experienced underwriters and finding banks that align with the deal's requirements.
(15:31) Navigating the loan process by identifying the sweet spot of different banks and working with them.
(15:59) The role of loan summaries and conversations with bankers in facilitating deals.
(16:20) Summary of the key points discussed

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💥 Thanks for watching 💥
#SBAfinancing #SBAguidelines #smallbusinessadministration #SBA

About Beau: Beau Eckstein is a real estate entrepreneur, TV personality, and commercial mortgage advisor, specializing in construction financing and multi-family lending.

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