The SBA 7(a) Acquisition Loan Process: A Comprehensive Guide

Small Business Administration (SBA) 7(a) loans are a popular financing option for entrepreneurs looking to acquire existing businesses. This article will walk you through the typical process and timeline for obtaining an SBA 7(a) acquisition loan.

Initial Steps and Documentation (1-7 days)

1. The borrower works with an SBA broker to gather necessary financial documentation.
2. The SBA broker collaborates with the business broker or seller to collect all required business documentation.
3. Upon receiving all necessary documents, the SBA broker submits the application to appropriate banks for loan consideration.

Timeline: This initial phase can be completed in just a few days if all documentation is provided promptly.

Loan Proposal and Good Faith Deposit (2-5 days)

1. Banks typically respond with questions, concerns, or a proposal within 24-48 hours.
2. The SBA broker presents the loan proposal to the borrower.
3. If the borrower accepts the terms, they sign and submit a good faith deposit (usually $2,500-$5,000).

Underwriting Process (1-3 weeks)

1. The bank follows up with additional requirements within 24-48 hours of receiving the deposit.
2. The borrower submits additional documents such as a business plan, projections, SBA forms, and a bank application.
3. Once all requirements are met, the file is assigned to an underwriter.
4. The underwriting process typically takes 1.5 to 3 weeks, depending on the bank’s workload and time of year.

Loan Approval and Commitment (2-3 days)

1. The underwriter submits the loan to credit officers or a credit committee for approval.
2. A decision is usually made within 24-48 hours.
3. If approved, the bank issues a commitment letter within 24 hours.
4. The borrower reviews and signs the commitment letter.

Closing Process (3-5 weeks)

1. The borrower submits an additional deposit for third-party reports required by the SBA.
2. A closer is assigned and provides a detailed list of closing requirements.
3. The borrower works on meeting all closing needs, which typically takes 3-5 weeks.

Common delays in the closing process:

• Legal documentation and purchase agreement negotiations
• Meeting insurance requirements
• Resolving issues with tax verification, lien searches, or background checks
• Obtaining landlord requirements (for leased spaces)

Final Steps and Funding (1-2 weeks)

1. Once all closing needs are met, the file is approved by the SBA for funding.
2. The bank prepares documents and assigns an official closing date.
3. Loan documents are signed, and funds are disbursed.

Overall Timeline

• Standard acquisition loans: 45-60 days
• Acquisition loans including real estate: 60 days minimum

It’s important to note that these timelines can be shortened through proactive communication and prompt submission of required documents. Conversely, delays in providing necessary information can extend the process significantly.

By understanding this process and working closely with experienced SBA brokers and lenders, borrowers can navigate the SBA 7(a) acquisition loan process more efficiently and increase their chances of a successful business acquisition.