For the line by line example and what else goes into the total project cost, read the article How much cash do you need to buy a business with an SBA loan?
Transcript
Buyers ask me how much cash they really need to buy a business with an SBA loan. The 10% down you've heard isn't the entire story.
Under SBA rules, a buyer usually has to put in at least 10% of the total project cost. That's more than just the price of the business.
Let's say the price is $800,000. You add $50,000 in closing costs and $100,000 in working capital to run the business. Now the project is $950,000. So your minimum is about $95,000, not the $80,000 that you planned.
Now, can a seller carry part of that? Sometimes. A seller note can cover up to half of that 10%. But it only counts if the seller agrees to take no payments for the life of the loan. And that's a hard ask.
On top of that, you want a cushion of your own outside of the deal for those first few months as you ramp up.
Your lender will confirm what really applies to you as a buyer. And if you know someone who's looking to buy a business, send them this so they know how to use the SBA.
Thinking about buying or selling a business? Talk with me about selling, or browse the video library.
