SBA Loan Down Payment – When Can It Be Borrowed?
You can borrow the down payment for an SBA loan if you have another source of income outside of the business that you are borrowing the money for AND if the payment on the borrowed money is something you can comfortably afford.
The Small Business Administration states the following in their “underwriting manual”:
If the Small Business Applicant can demonstrate repayment of this personal loan from sources other than the cash flow of the business, the cash injection may be considered equity. (Note: The salary of the business owner does not qualify.)
There are many good examples of how this could work. Probably the most common scenario is one in which a prospective borrower has home equity available that they can borrow against and a regular job with regular income to make the payments (or a spouse with a job and consistent income) AND the business being acquired or started is the type where the business owner does not need to be on site full time. (Home equity payments are usually very affordable).
A good example of this would be a self storage business, especially one where the customers can let themselves in. Other good examples would be businesses where the business owner has capable management – like a hotel.
100% Financing – An Alternative for Existing Businesses
Keep in mind that there is a 100% financing option with the SBA 7a loan for existing businesses buying real estate. It is not without it’s shortcomings, but it can be a very good solution for some businesses. Click here for more info.
If you have a question about your situation feel free to e-mail me at jking(at)greencommercialcapital(dot)com.