- On September 18, 2017
- Timing Alignment
Both conventional and SBA loans can take 30 to 45 days to fund but this time clock begins after we have a complete financial package and there are a few factors that can potentially delay (but typically don’t) the process. Before scheduling a hard closing date with the seller consider checking to make sure the loan can be done in time with your lender.
- Seller Financing
While 100% financing is available to qualified deals and buyer borrowers, most deals we see are structured with the seller financing 25% and the buyer financing 75% with the loan. For SBA loans the seller note is required to be on standby for 2 years.
- Seller Subordination
In all cases, our lenders require that the seller note be subordinated to the lender. This means the seller is in second position behind the lender. It doesn’t matter if the seller is financing 25% or 75% the subordination letter is required. Some sellers who are financing a majority of the deal may not like being in second position to a lender who is financing less than they are. While this is understandable, it’s just the way it is in commercial lending. This is a topic that should be covered with the seller during the negotiating process and not sprung on them at the last minute and potentially kill the deal. The lender always provides the subordination letter as a closing requirement.
- Business Valuations
Third party business valuations are required on the seller’s practice over $500K for our non-SBA lenders and over $350K for SBA loans. AdvisorLoans lenders will not finance an amount that is higher than the valuation estimate. There are several third-party valuation companies focused on Financial Advisors. Not all lenders accept all valuations and some lenders require that they order the valuation.
- First lien position
Most all lenders will require a first UCC lien position on all acquisition loans. This means that advisors who have other business loans that have placed a UCC lien, such as SBA loans, bank loans, seller notes, and broker dealer loans (other than recruiting notes), will need to be refinanced and rolled into the new loan.
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