SBA Loans for Acquisitions

SBA loans for acquisitions

The US government’s fiscal year ends September 30, which means all sorts of annual government data will be released soon, including SBA loan data. A recent bank press release highlighted the use of SBA loans for acquisitions – that is, someone borrowing money from a bank to buy an existing business rather than start or grow their own business.

This story about Huntington Bank includes lots of details, but the highlight of acquisitions caught our eye:

Huntington’s SBA lending for business acquisitions trended up for the second consecutive year, totaling $302 million for a 21% increase over fiscal year 2016.

“We continued to see a large percentage of Baby Boomers finding SBA loans a smart move for help in passing along their businesses to the next generation,” said Maggie Ference, SBA group manager at Huntington.

In total 38% of the SBA loan volume of the #2 originator of SBA loans was used to acquire existing businesses. That seems like a lot! However this was not the sole driver of Huntington Bank’s growth as overall SBA loan volume grew even faster, at 25%.

How Many SBA Loans for Acquisitions?

It’s hard to say if this is representative of SBA loans overall. The SBA’s statistics show that 64% went to existing businesses and 36% went to new businesses. However, we couldn’t find out how the SBA defines “new businesses” in these reports. For example, if you set up a new corporation to buy the assets of an existing business, is that “new” or “existing” in the eyes of the SBA and the banks who make SBA loans?

In any case, this information should be helpful both to business people who are good at running companies but not starting them – acquisitions are one viable option – and to existing business owners who are thinking about growth through acquisition. SBA loans for acquisitions are clearly a great option to consider for financing the transaction.

 

Don Gooding

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