When is the “Right” time? – Now May Be the Time to Purchase Your Own Business
Purchasing a business is extremely tough as you want to find the perfect opportunity that fits your needs and passion. But with COVID-19 affecting all businesses, finding a perfect opportunity is almost impossible when surrounded by an imperfect situation to purchase a business.
Thankfully in 2020, SBA provided a huge incentive to assist in purchasing your own business. Although this helped many individuals to move forward purchasing their own business, the program ended on September 27, 2020. On December 27, 2020, The Consolidated Appropriations Act of 2021 provided additional COVID relief for small businesses. The bill includes limited-time benefits for small business owners seeking SBA 7a financing.
For all new 7a loans that close and fully fund by September 30, 2021, borrowers will be eligible to receive the following benefits:
- 3 months principal and interest payments made by the SBA, capped at $9,000 per month
- No SBA guaranty fee (up to $138,125)
This program allows you to purchase a business through SBA 7(a), 504, and microloans and have SBA pay the first three months principal and interest capped at $9,000/month and the SBA guaranty fee for the Buyer. Do I mean deferred payments? No, SBA is making full payments of principal and interest to your SBA lender for the first three months straight, and you will be no longer responsible for the payments, and there will be no SBA guaranty fee for the purchase.
There is a couple of very important that you should keep in mind to benefit from this great incentive for business buyers:
- The maximum loan amount for this SBA guaranteed loan, primarily SBA 7(a), is $5 million.
- Loans must be submitted to and issued by the SBA by September 30, 2021. In other words, SBA loan number for your loan to purchase your business must be issued to your lender by September 30, 2021.
- It typically takes 60 to 90 days to complete an SBA loan process.
This incentive will allow you as a Buyer to potentially save hundreds of thousands of dollars if you successfully purchase a business within this time frame. For example, for a business being purchased for $1,000,000 based on a 20% down payment at 6% annual interest with a 10-year amortization, your savings will sum up to $26,644.92 for SBA making full payments of principal and interest and approximately $17,550 for SBA waiving guaranty fee.
Any other question? Please feel free to contact V-AID, Business Broker Dallas! We are here to assist you in accomplishing your goals even in this challenging time.
Source: U.S. Small Business Administration
