Selling a Business when there is an existing SBA loan

Selling a business when there is an existing Small Business Administration (SBA) loan involved adds complexity to the sale process. If you have an outstanding SBA loan on your business, there are several important steps you need to take when selling the business:

  1. Notify the Lender: Inform the lender that you intend to sell the business. The lender will need to be involved in the process and will require specific information about the sale.
  2. Prepayment Penalty: Check the terms of your SBA loan agreement to see if there is a prepayment penalty. Some loans may have penalties for paying off the loan before the maturity date.
  3. SBA Approval: Obtain the lender’s approval for the sale of the business. Selling the business will trigger a “change of ownership” event, which requires the lender’s consent.
  4. Release of Collateral: Discuss with the lender the release of any business assets that were used as collateral for the loan. The lender may require repayment of the loan or replacement collateral.
  5. Seller Financing: If the sale price does not cover the full amount of the outstanding loan, you may need to consider seller financing or other arrangements to cover the remaining balance.
  6. SBA Guarantee: If your SBA loan has a government guarantee, the lender will work with the SBA to process the change of ownership and transfer the guarantee to the new owner.
  7. Due Diligence: Be prepared to provide the buyer and lender with all necessary financial records and documents related to the SBA loan during the due diligence process.
  8. Cooperate with the Lender: Work closely with the lender and the buyer to ensure a smooth and timely transaction. Keep all parties informed and updated throughout the process.
  9. Close the Loan: After the sale is completed, work with the lender to close the SBA loan. This may involve paying off the loan or transferring the debt to the new owner.
  10. Seek Professional Advice: Selling a Florida business with an existing SBA loan is a complex process, so it’s essential to seek professional advice from a business broker, attorney, and accountant who are familiar with SBA loans and business sales.

Navigating the sale of a business with an outstanding SBA loan requires careful planning and coordination. By following the necessary steps and seeking expert guidance, you can successfully sell your business while fulfilling your obligations to the lender and ensuring a smooth transition for the new owner.