A few days ago the SBA came out with a new lending policy to be used when buying a business. Business brokers are very excited about this change since it will facilitate more financing for small business purchases. About 15 months ago the SBA made a draconian change in their underwriting that eliminated business acquisition financing for goodwill in excess of $250,000. This 2008 policy change effectively dried up SBA lending for buying a business sales. Small business financing is a unique problem since the loans are usually not large enough for lenders to make much profit.
SBA loans are a very important part of the small business financing options. The newly released SBA business loan policy allows up to $500,000 in goodwill financing or if the buyer puts up at least 25% in equity the goodwill limit is uncapped.
This policy change is important because the goodwill value in the transaction is an indication of a highly profitable business.
SBA loans are back and business buyers and sellers will be more able transfer business ownership to retain jobs and help their communities grow.