The Small Business Administration recently issued a new procedural notice offering significant benefits for small business owners seeking an SBA loan. The changes open the door to:
- Asset sales for partial changes of ownership acquisitions.
- Blended term for a partial change of ownership or partner buyouts.
- No title requirement for vehicles under $10,000.
- The ability to refinance merchant cash advance (MCA) debt.
Here is what you need to know about the changes.
Asset Sales
The updates enable asset sales for partial changes of ownership acquisitions in the SBA 7(a) loan program. This is great news for both buyers and sellers of small businesses.
This is a significant development because of:
- Reduced liability: Asset sales allow buyers to acquire specific assets without taking on the liabilities of the seller’s previous business. This provides a cleaner, more manageable transition with fewer potential risks.
- Tax advantages: In many cases, asset purchases can lead to better tax treatment. Buyers can typically depreciate the acquired assets, leading to potential tax savings that improve the bottom line.
- Access to SBA financing: With the new procedural notice, the SBA is making it easier for buyers to leverage SBA financing for asset purchases.
All this opens new opportunities for buyers who want to acquire businesses without the complex liabilities tied to stock purchases. For sellers, it provides a clear, structured path to an exit while maximizing value.
Blended Term
Previously, SBA loans for partial change of ownership were limited to a 10-year term, even if commercial real estate was part of the purchase. Now, the term can be blended based on the underlying assets being purchased, providing more flexibility and potentially better terms for your business needs.
No Title Requirement
Another positive change is that lenders no longer need to take title on vehicles valued under $10,000. This simplifies the process and reduces the paperwork, making securing the financing you need easier.
Refinancing MCA Debt
For businesses struggling with merchant cash advance (MCA) debt, the SBA move will open doors to refinancing options, providing businesses with the chance to alleviate financial pressure and regain stability.
MCAs have been a convenient source of quick capital for many small businesses. However, high interest rates and rapid repayment schedules can put businesses in a cycle of debt, making it difficult to maintain healthy cash flow. The SBA’s new procedural notice provides a pathway to refinance MCA debt using SBA-backed loans, offering substantial benefits to business owners.
For example:
- Lower interest rates: One of the most significant advantages of refinancing MCA debt through SBA loans is access to lower interest rates. SBA-backed loans typically offer more favorable rates than traditional MCAs, reducing the cost of borrowing and easing the financial burden on small businesses.
- Extended repayment terms: Unlike MCAs, which require daily or weekly payments based on sales, SBA loans offer more flexible repayment terms, often extending over several years. This can lead to lower monthly payments, allowing businesses to maintain cash flow and avoid the stress of frequent, high-cost repayments.
- Improved cash flow: By refinancing, businesses can free up cash that would otherwise be tied up in expensive MCA repayments. This additional liquidity can be reinvested into operations, used to hire more staff, expand inventory or simply improve day-to-day operations.
How to Take Advantage of the Opportunity
If you’re thinking about refinancing MCA debt or acquiring or selling a business, now is a good time. Navigating the SBA process may seem daunting, but it can be a smooth and rewarding experience with the guidance of an SBA loan expert.
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Visit liveoakbank.com to explore how to take advantage of SBA’s new procedural notice.