SBA Buyout Checklist
Do you qualify for an SBA-financed firm buyout?
If the buyers can answer these five questions and the owner can answer these four the way a lender wants, an SBA-financed sale of your A/E/LS firm to its key employees is likely within reach.
Key employees can buy in with as little as 5% down, and the seller receives all or nearly all of the proceeds at closing. Not an ESOP.
For Buyers
Buying the firm you help run
Answer for yourself, then for everyone buying with you. The bank underwrites the whole buyer group.
- 01
Are you a U.S. citizen?
SBA eligibility rules apply to every owner of the company that buys the firm.
Lenders want to hear: Yes
- 02
Have you defaulted on government debt?
A past default on a federal loan, such as an earlier SBA or student loan, can stop an SBA loan before underwriting starts.
Lenders want to hear: No
- 03
Do you have good credit?
Each buyer personally guarantees the loan, so the lender reviews each buyer's personal credit.
Lenders want to hear: Yes
- 04
Does each member of the buyer group meet these same tests?
When several employees buy together, the lender looks at every one of them, not only the lead buyer.
Lenders want to hear: Yes
- 05
Do you hold a professional license to operate the business?
An A/E/LS firm needs licensed professionals to keep serving its clients, and the bank wants that license inside the ownership group.
Lenders want to hear: Yes
For Sellers
Selling your firm to your team
These are the first things a lender checks about the business before it looks at the buyers.
- 01
Do the firm's annual sales exceed $1,000,000?
These deals are built for A/E/LS firms with $1M to $10M in sales.
Lenders want to hear: Yes
- 02
Can someone successfully operate the business without you?
A bank lends against a firm that keeps running after the founder steps back.
Lenders want to hear: Yes
- 03
Does the firm's federal tax return show a profit?
Lenders underwrite on the cash flow in the tax returns, because that cash flow repays the loan.
Lenders want to hear: Yes
- 04
Does the firm have at least one employee who holds a professional license?
A licensed employee keeps the work moving after you leave, and is often the natural buyer.
Lenders want to hear: Yes
A quick screen, not a loan decision. SBA requires a 10% equity injection, and the lender and current SBA rules decide eligibility for every transaction. See how the equity injection works.
What Your Answers Mean
Where to go from here
All yes on your side
The basics are in place. The next step is an independent valuation and an early read from a lender, so both sides know what the bank will finance before anyone commits to terms.
One or two answers missed
That is rarely the end of it. Adding a second buyer, cleaning up the financials, or building a management bench before the sale fixes most gaps, and they are easier to fix with lead time.
Not sure how to answer
Call before you guess. A confidential conversation with a former banker who works only with A/E/LS firms will tell you quickly where your deal stands.
Start the Conversation
Find out what a bank will finance before you commit
A confidential, no-pressure conversation about your firm, the buyers, and the financing. We prepare the valuation and loan package with the lender's underwriting in mind.