Many chiropractic buyers have heard about the current incentives for buying a chiropractic practice with an SBA loan, so we are getting a lot of questions about the basics of how an SBA Loan works. Here’s a quick primer on SBA loans so you can understand how they may benefit you.
Buying a Chiropractic Practice with an SBA Loan – The Basics of SBA Involvement
First, it’s important to understand that the SBA does not actually lend you the money to purchase a chiropractic practice, a bank or other lender does.
Instead, the SBA acts as “insurance” for the bank. This is helpful for both the bank and you, the Buyer. From one angle, the SBA is another set of eyes looking upon and approving the transaction. That’s a benefit to you as the Buyer because the SBA (and ultimately) the bank will not approve a bad purchase. They don’t want to lend you the money and watch your default on your loan because the business was overpriced or a bad deal.
The bank also benefits here because, on the odd chance that the loan does default, the SBA will actually pay off the loan to the bank. So it’s easy to see why the bank likes SBA backing as well.
Buying a Chiropractic Practice with an SBA Loan – The Process
To acquire a loan to purchase a chiropractic practice, you apply to a bank and in many cases, you will be applying for SBA funding through that bank loan application. Technically, you do not have to apply for SBA financing and you can choose to finance through the bank’s private or local funding options.
But again, there are good reasons to utilize SBA funding. From the Buyer’s perspective, the bank applications will be 95% identical from bank to bank when you go the SBA route, so this also allows you to comparison shop by submitting your loan applications to several banks.
Requirements for Buying a Chiropractic Practice with an SBA Loan
One of the biggest reasons buyers go the SBA loan route is that these loans have several advantages over most private loans:
- SBA loans do not require additional collateral to secure the loan
- SBA loans have a low downpayment minimum (10% and in some cases, 5%)
- SBA loan can be guaranteed for any amount up to $5,000,000 (enough for most chiropractic practice purchases)
- SBA loan term length is up to 10 years
Certainly, these benefits do come with some eligibility requirements. But these are pretty basic. For example, to be eligible for SBA loans you must:
- Have a good credit score (typically 650+)
- Show significant investment in the business (ex: a downpayment; SBA will not do “no money down” loans, nor will they allow the Seller of the business to make the downpayment for you or creatively credit you the money to purchase.)
- Have work experience in the field (generally 2 years, but there can be exceptions made to this rule)
Advantages of Buying a Chiropractic Practice With an SBA Loan RIGHT NOW
Perhaps the biggest advantage of buying a chiropractic practice with an SBA loan right now is that if you purchase prior to September 27, 2020, you can be eligible for an SBA incentive program whereby the SBA will make the first 6 months of loan payments on your behalf!
This is not a loan deferral – this is the SBA paying those monthly loan payments for you!!
Naturally, buyers are doing the math on this program and seeing that it can save them many thousands of dollars in loan payments.
Even better, there’s no forms or special application process needed except the fact that the SBA loan must be closed by September 27, 2020.
NEXT STEPS If You are Considering Buying a Chiropractic Practice With an SBA Loan
Now that you know a bit more about Buying a Chiropractic With an SBA Loan, if you are looking to purchase, it’s time to act quickly!
If you’d like more detailed information on loan process, check out our FREE Practice Financing 101 webinar to dive into making it happen.