Small Business Lending Tip: How to Finance an SBA Loan with Only 10% Down
June 9, 2021Should I Use a Small Business Broker to Find My SBA Lender?
June 9, 2021Owner equity is an important piece of evaluation criteria for SBA loans.
As a new small business owner applying for financing, you may be overwhelmed by the amount of criteria that a Houston SBA lender uses to evaluate a loan. While I have discussed small business loan criteria before, I want to dive a little deeper into one specific aspect: owner equity.
Often referred to as “skin in the game”, owner equity in the business is an important part of any SBA loan application. Fortunately for small business owners, qualifying equity can be made up of three different types of investment including:
- Dollar Investment: Also known as the “down payment”, this is the most common form of owner equity.
- Outside Assets: If the business owner has an asset outside of their business’ balance sheet (i.e. property), he or she can use this as collateral for the loan.
- Seller 2nd Lien: The seller of the property or small business can take a second lien and avoid repayment until after the SBA loan has been paid off.