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Change of Ownership Loans in 2024
Change of ownership is a business age category tracked by the SBA. The SBA has specific and different rules for each type of loan where ownership changes hands. During FY 2024 there were 627 banks funding 4,151 change of ownership loans for $4.8 billion with an average loan amount of $1,158,934.
SBA Lending to New Businesses Under 2 Years Old
Securing a loan as a new business can be particularly challenging. Traditional lenders often hesitate to finance young companies with limited operating history and unproven revenue streams. These lenders prioritize established businesses with a track record of success and a demonstrable ability to repay debt.
Are Local Banks Good for SBA loans?
When a small business owner thinks they want to apply with their current or a local bank it is primarily based on prioritizing familiarity. “I’m familiar with this specific bank because I drive by it on the way to the office”. Or, “the local branch I bank at is familiar with me so I have the best chance of my loan getting approved with them”.
1% of SBA Banks Fund Half the Loans
SBA lending is a lending specialty some lenders have made a special focus and have dedicated the resources and people to maximize how many SBA loans they can close annually.
With SBA’s extensive rules and requirements, success in this space demands a well-rounded combination of expertise, credit risk acumen, and a robust business development network.
To understand what and where the top SBA lenders are focused on, we analyzed the collective performance of the most recent top 1% SBA lenders. We looked at their combined top industries, franchise loan industries, states and cities, the emphasis on out of state lending, average loan amounts, and our SBA lending forecast model for combined lenders in the one percent.
Franchisors: Replace Your Loan Broker With LoanBox
For growing franchisors, it can become a task to find the right lenders, and enough of them to assist all of their different franchisees’ different financing needs in different states. Most franchisors aren’t able or even want to have full time staff dedicated to assisting their franchisees with financing. But most franchisors do want to help and often refer their franchisees to third party loan brokers, ROBS providers, or a bank or two they know who have financed other franchisees.
While franchisors are selling new franchisees in part on the franchisor’s successful system, most franchisors don’t also extend a system for assisting franchises with financing. If you’re a franchisor and this sounds generally like you, then consider the LoanBox Franchise Lending System.
Startup Business Loans in 2024
Startup business loans is a popular loan purpose in SBA lending. While it varies by year, startup loans account for just under 20% of all SBA 7(a) loans and nearly 40% of the franchise funded loans over the last year.
Default Paradox: The Bigger the Loan, The Smaller the Risk
A deep dive into loan analytics reveals an intriguing paradox: the larger the loan, the lower the risk of default. While high-value loans carry greater financial consequences for both borrowers and lenders, they are statistically less likely to default compared to smaller loans.
SBA Franchise Lending in 2024
457 banks funded 3,680 franchise loans for $2.7 billion to franchise borrowers from 1,115 different brands in 222 industries. The average loan amount funded was $722,652. SBA franchisee loans were funded in all 50 states to borrowers from 1,633 cities. 81% of SBA franchisee loans were funded for a project state which is different than the bank’s state. The average bank spread over the prime rate was 2.37%. Franchise business loans accounted for 13% of all funded SBA 7(a) dollars.
LoanBox is the Business Owner's Crystal for Selecting a Lender
Getting it right the first time holds immense value for small business owners. LoanBox empowers entrepreneurs to select the right business loan and lender, from the outset. This is why LoanBox shines for big small business loans, when delays from not getting it right can result in losing out on the deal all together. Use LoanBox to get your big small business loan done right, with the right lender, the first time around.
A Dozen Ways SBA Lenders Differ
From our experience, the biggest misperception by far about SBA lenders is that they are all pretty much the same. After all, how different can an SBA loan be from one lender to the next? The truth is that while the SBA is the same for all, SBA lenders are very different from each other, and many are different in many ways.
What Business Owners Need to Know About Equity Buy-ins
Equity buy-ins, where a non-shareholder purchases a portion of equity, are becoming increasingly popular. As succession planning and equity retention strategies gain traction, so do partial equity buy-in loans.
10 Steps of the LoanBox Process
Here’s what the loan process looks like on LoanBox:
Decision Direction: Determine whether you wish to navigate your LoanBox loan independently or prefer the guidance of a LoanBox Advisor. From application to funding, it provides a comprehensive suite of resources, including an AI lending assistant and support through human chat and app-to-app messaging, minimizing the need for direct human interaction. Alternatively, you can opt for a LoanBox Advisor to handle everything on your behalf.
3 Essential Questions for Choosing the Right Lender for Your Business Loan
3 Essential Questions for Choosing the Right Lender for Your Business Loan
Selecting the right lender the first time can be complex, but it ultimately boils down to three key questions about how the bank relates to you at this moment in time for your current situation and circumstances. At LoanBoxBox, we match businesses with SBA lenders based on three primary categories: experience, focus, and criteria. For franchise borrowers we add a fourth component which is brand familiarity.
If You Need a Bank Loan to Acquire a Business, Then it Pays to be a Financing Realist
When you're eyeing an acquisition that requires bank financing, figuring out how to secure that financing is crucial. Without it, all your efforts and arrangements can fall apart. That's why addressing financing issues upfront—before locking in any deal terms—should be your priority. If securing financing is essential for the acquisition and you're unable to get it, what’s the point of moving forward?
The Four Pillars of Business Continuity Planning: Exit, Continuity, Transition, and Succession
Understanding the distinctions between exit, continuity, transition, and succession planning can significantly impact how small businesses navigate ownership changes and unexpected events. Each type of planning plays a unique role in ensuring client continuity and the ongoing operation of your business.
Not All SBA Loans or Lenders Are Created Equal
Understanding the landscape of SBA lending is crucial for small business owners navigating their financing options. The SBA is working to make its lending process more accessible and streamlined, as reflected in their recent updates to standard operating procedures (SOPs). A significant change you’ll notice is the phrase “do what you do,” which appears six times more often in the new SOPs. This shift promotes greater lender autonomy, allowing them to exercise more discretion in key areas and fostering a more dynamic lending environment.
House Collateral and SBA Loans: What Small Business Owners Should Know
SBA loans come with their own set of pros and cons, and for borrowers with substantial home equity, one major downside is the SBA’s personal property collateral rule. Specifically, for loans exceeding $500,000, if you have 25% equity in any personal real estate—whether that’s your home or an investment property—that equity has to be used as collateral, potentially up to the full loan amount. Notably, SBA lenders are instructed to deduct 15% from the appraised value of your residential property before calculating your equity ownership ratio.
Late Business Loan Payment Management for Small Business Owners
For independent business owners facing distressed loans, staying on top of payments is crucial for maintaining a solid financial standing. If you anticipate financial difficulties lasting a considerable time—like a year—it's vital to communicate openly with your lender. Short-term solutions, such as a three or six-month forbearance, can offer immediate relief, but consistently delaying payments past 60 days can raise serious concerns with your financial institution. Extending overdue payments can strain relationships with lenders and adversely affect your credit score, making it a less effective long-term strategy.
Essential Business Valuations for Acquisition Loans
With rising valuations and recent changes to SBA rules, let’s dive into the 7 most common questions we receive about bank loan-related business valuations.
Understanding Seller Note Subordination in Business Acquisitions
If you're considering purchasing a business and planning to secure a bank loan, there's an essential legal document you should be aware of: the seller note subordination letter. This document clarifies the payment hierarchy between two types of debt you might encounter: "Senior Debt" and "Seller Note."