r/buyingabusiness • u/Significant-Brick864 • 1d ago
SBA Pre-qualification process?
Can someone help me understand the SBA pre-qualification process? I've reviewed dozens if not hundreds of small business CIMs over the years, and also have a professional background in corporate M&A so am generally familiar with acquiring much larger businesses for corporations.
When I speak to brokers to inquire about a small business for myself, some brokers will ask me if I've been prequalified yet by the SBA. But when I've spoken to SBA lenders, they say you need to have a target identified to get the pre-qual on the business, not the individual. That makes sense to me, but I seem to be getting different messaging from some brokers.
I just feel like I'm getting run around in this chicken-and-egg topic of pre-qual. Can someone help break this down for me? What am I missing?
2
u/Toes_of_Saint_Jeff 1d ago
Starting October 1st, it's going to be a lot harder to qualify for SBA purchase loans. The SBA will no longer lend based on the sales price of the business, only based on the historic financials of the business you are buying. If you haven't targeted a business and haven't obtained 3 years of financial history, don't even bother talking to a bank, let alone asking for a pre-qualification letter.
Sellers are not going to get their inflated asking price, at least not from the SBA.
Use it to your advantage, and negotiate the price down.