Buyer Acquisition Incentives
Although December 2020 was a strong month for business transaction closings for The FBB Group, I believe that most of us are glad to see 2020 in our rear view mirror and are looking forward to a “Back to Normal 2021”. For the business transfer industry and sellers considering a sale in 2021, Santa delivered a late but significant gift when the President signed the Consolidated Appropriations Act of 2021. This legislation included significant incentives to purchase a business with SBA funding, which can apply to loans up to $5,000,000 for a business acquisition and even larger if real estate is involved.
Details are provided in the article below from Diamond Financial one of the larger and more active national SBA lenders. The new stimulus incentives are even more attractive than the CARES ACT stimulus incentives, which expired on September 27, 2020, as the new stimulus package includes additional lender guarantees, significantly lower upfront costs, and the forgiveness of the first six months of loan payments for the Purchaser.
SBA Incentives for Buyers Included in Consolidated Appropriations Act of 2021
Included in the Consolidated Appropriations Act of 2021 were many changes to SBA lending programs. Those changes included two incentives for new buyers: six months of payments and guarantee fees waived. Subject to conditions, new buyers will have their first six months of loan payments paid for and will have their SBA guarantee fee waived (typically 2-3% of loan amount). These incentives make it a great time for a potential buyer to make the jump and acquire that business they were previously thinking about.
Buyers Will Have Their First Six Loan Payments Paid For
Buyers who have their SBA loan approved between February 1, 2021 and September 30, 2021 will have their first six loan payments paid for by the SBA, capped at $9,000 per month. This is extremely helpful to new buyers and provides an instant boost to liquidity through the first six months of ownership, the most crucial time. Although buyers who have monthly loan payments higher than $9,000/month will not have their entire payment paid for, they will still receive $54,000 in total savings from the SBA.
Guarantee Fee Waived to Buyers
Buyers will have their guarantee fee waived until September 30, 2021. Although included in the loan, the guarantee fee is typically one of the largest costs on an SBA loan and can potentially represent savings of up to $120,000 for larger loans. With this fee being waived, loan amounts and monthly payments will also decrease, saving borrowers up to $15,000 annually for larger loans.
| Purchase Price | Loan Amount1 | Guarantee Fee | Monthly Payment2 |
| $5,000,000 | $4,581,800 | $126,400 | $50,867 |
| $5,000,000 | $4,456,000 | Waived | $49,471 |
| Savings: | $126,400 | $16,752/yr |
1Assumes $250,000 working capital and $136,800 in closing costs with a 15% down payment
2Assumes a 120-month, 6% note
For more information, please visit www.easysba.com to see all relevant documents and keep up with the latest changes on programs and information.
Matthew Lyon | SBA Relationship Manager
5306 Six Forks Road, Suite 105 | Raleigh, NC 27609
Phone (919) 376-2923 | Office (919) 782-3101 | Email mattl@easysba.com
The impact to buyer is lower costs and payments making a business acquisition more affordable. The impact to a Seller is that more buyers can afford the business and the increased demand and lower Buyer payments should increase the value, similar to the current residential real estate market.