sba loan assignment form

Assumption, Assignment and Sale of SBA 7(a) Loans

https://youtu.be/mSZoxM5QVNo

You have a business with an SBA guaranteed 7(a) loan and now you are looking to sell the business.  What about the loan?  Can you simply assign the loan and have the buyer assume the loan in your sale documents without anything more?  Generally speaking, the SBA will need to approve the assumption and certain requirements must be met: 1. Unless the assumption is part of a workout or the loan is in liquidation status, the proposed assumptor must meet the applicable 7(a) Loan eligibility requirements in the most current version of the SBA’s standard operating procedures; 2. The proposed assumptor should be the primary owner of the business; 3. The proposed assumptor should have business experience and management skills that are equal to or better than the Borrower's; 4. The proposed assumptor must have a satisfactory credit history; 5. The proposed assumptor must have the ability to repay the SBA loan in full; 6. No collateral should be released; 7. No collateral should be subordinated except as otherwise provided with regard to funds that will be used to make improvements to the collateral that will maintain or increase its value; 8. The proposed assumption should not have a negative impact on the operation of the business; 9. The proposed assumption must not have a negative impact on the recoverable value of the collateral; 10. The existing collateral should be adequate to secure the loan, if not and whenever possible, additional collateral should be required as a condition for the assumption; 11. Existing Obligors must not be released without SBA’s prior written approval; 12. The terms of the assumption must be set out in a written agreement signed by all of the parties to the agreement; 13. The terms of the assumption must include a "due on sale or death" clause that prohibits any future assumption of the SBA loan; and 14. The terms of the assumption must not include a real estate contract, i.e., the seller may not retain title to the property until an agreed upon amount is paid.

If you are facing an SBA loan default, contact Protect Law Group today at www.sba-attorneys.com or 1-888-756-9969 to schedule your FREE initial consultation.

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How to Apply for an SBA Loan in 5 Steps

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Table of Contents

1. Choose the right SBA loan for your needs

2. determine if you qualify for an sba loan, 3. find an sba lender, 4. prepare your sba loan application, 5. submit your sba loan application package.

U.S. Small Business Administration loans typically offer long repayment terms and low interest rates. As a result, these small-business loans are among the most affordable and sought-after forms of funding for entrepreneurs — but SBA loan applications are also among the most rigorous.

By taking the time to understand the process and your loan options, however, you’ll put yourself in the best position to apply and get approved.

Here are five steps to apply for an SBA loan.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

There are three main SBA loan programs : the 7(a) loan program, the CDC/504 loan program and the microloan program.

SBA 7(a) loans are issued by participating lenders, like banks and credit unions. 504 loans, on the other hand, come from three sources — a third-party lender, a Certified Development Company (CDC) and the borrower. Both of these loan types are partially-guaranteed by the SBA.

With microloans, the SBA funds intermediary lenders (typically nonprofits and community organizations) directly and they completely process, distribute and administer the loans themselves.

Here’s an overview of these three SBA loan options:

Ultimately, the right SBA loan for you will depend on why you need funding, how much funding you need and your qualifications, among other factors.

SBA loan requirements will vary based on your loan program and lender — but you’ll also have to meet a set of standard criteria laid out by the SBA. These qualifications include:

Must be a for-profit business operating in the U.S.

Must be a small business, as defined by the SBA.

Must be able to demonstrate the need for the loan funds and show how you’ll use them.

Must have sought out other forms of financing before turning to an SBA loan.

Must be able to show that you’re creditworthy and that you can repay a loan.

Cannot be delinquent on any existing government loans.

If you can meet these requirements, you’ll then need to confirm that you can qualify with an SBA lender. Because 7(a) and 504 loans are issued by traditional lenders, they tend to have more stringent criteria than microloans. You’ll typically need:

Good credit (score of 650 to 680 or higher). 

Strong revenue.

Multiple years in business.

For microloans, on the other hand, you may be able to qualify with a credit score of 620 or higher and less than two years in business.

If you don’t think you can qualify for an SBA loan, you might pivot your search to online lenders. These companies typically have more flexible qualification requirements and faster funding times compared to bank and SBA lenders.

» MORE: Compare the best online business loans

You’ll want to find an SBA lender that has sufficient experience processing and issuing SBA loans — and one that offers the loan type you’re looking for.

To start, you can try reaching out to a bank or financial institution with which you have a previous relationship. Popular small-business banks like Bank of America , Wells Fargo and Chase , for example, each offer 7(a) and 504 loans.

You can also browse a list of active CDCs and a list of active microlenders on the SBA’s website.

To connect with lenders directly, you can use the SBA’s lender match system . With Lender Match, you’ll answer a few questions about your business and in two days, you’ll receive an email with possible lender matches. You can then contact the lenders for more information and compare their rates, terms and fees.

The details of your SBA loan application will vary slightly based on your lender and loan type. In general, however, you’ll need to provide the following documentation:

SBA-specific forms

SBA Form 1919, Borrower Information Form.

SBA Form 912, Statement of Personal History.

SBA Form 413 , Personal Financial Statement.

SBA Form 148, Unconditional Guarantee (or the lender’s equivalent). The SBA requires that anyone with 20% or more ownership in the business provide an unlimited personal guarantee. Owners with less than 20% ownership may provide a full or limited guarantee (SBA Form 148L) [0] U.S. Small Business Administration . Lender and Development Company Loan Programs . View all sources .

Financial statements

Current income statement and balance sheet.

Income statements and balance sheets from the previous three years.

Cash flow projections.

Three years of business tax returns (or all tax returns to date).

Three years of personal tax returns.

Existing debt schedule, if applicable.

Detailed listing of all collateral.

Supporting documents

Business certificates or licenses.

Loan application history.

Resumes for each business owner.

Business overview and history.

Business lease.

If you’re using your SBA loan to buy a business , finance a franchise or purchase real estate, you may be required to provide additional documentation.

Once you’ve gathered all of your documentation, it can be helpful to have a mentor or business advisor look over your loan application in its entirety. They can point out missing pieces of information or help you strengthen any weak spots to increase your chances of approval.

Then, you’ll submit the application to your SBA lender. The lender will underwrite your application and decide whether or not to approve the loan.

If you’re approved, the lender will send your application to the SBA for review. During this process, the SBA may re-request documents or ask for additional information. Once you’re approved by the SBA, you’ll receive an initial commitment of your loan terms and you’ll start the closing process.

» MORE: Was your SBA loan application denied? Here’s what to do next

It’s important to note that not all SBA lenders have to send their applications to the SBA for review. Preferred lending partners, or PLPs, can make final credit decisions without SBA approval, thereby expediting the application process [0] Congressional Research Service . Small Business Administration 7(a) Loan Guaranty Program . View all sources .

Microloans are also not subject to SBA review, as these intermediary lenders have the authority to process, distribute and close loans on their own.

Overall, it can take anywhere from 30 to 90 days to get an SBA loan . PLP and microlenders can likely offer the fastest timelines, but SBA loans will still be slower to fund than many other small-business loan options.

Find the right business loan

The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.

A version of this article originally appeared on Fundera, a subsidiary of NerdWallet.

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How to Apply for an SBA Loan

Preparing to apply for an sba loan, figure out which type of sba loan is right for your needs, find a lender in your area, connect with lenders, choose your lender and begin the sba loan application process, best sba lenders for startups, types of sba loans, alternatives to an sba loan.

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Complete your application carefully to improve your chances of approval

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If you’re exploring funding options for your small business, you can learn how to apply for an SBA loan. Rates and terms on SBA loans tend to be more favorable for borrowers than private business loans, and different types of SBA loans are designed to meet different business needs.

However, the application process is extensive, and can vary by lender. Applying for an SBA loan will require you to share documentation about your business finances and goals. If you can get through the tedious application process, an SBA loan can provide the funds to help you make improvements or scale your business.

Key Takeaways

• Learning how to apply for an SBA loan can help you get through the process more easily.
• Different types of SBA loans include the 7(a) loan (the most common), the 504 loan, and a microloan. 
• SBA-approved lenders may have different application processes for their loans.
• Regardless of the lender, an SBA application will likely require that you submit business and personal financial documents.
• SBA loans typically include a lengthy underwriting process.

SBA loans are backed by the Small Business Administration (SBA) , but facilitated through private lenders. Therefore, the process for applying can vary slightly depending on which financial institution you work with. In general, you can expect that the process of starting to apply will include: 

• Determining which type of SBA loan is right for your needs 
• Finding lenders in your area
• Connecting with lenders
• Choosing your lender
• Beginning the SBA loan application process

If you’re considering applying for an SBA loan, you’ll need to identify your business goals, understand your finances and know how you’ll use the funds (and pay them back). You’ll also want to understand your credit status.

As part of the application process, SBA lenders will expect to see documentation or ask questions about all of those components. Some of the key documents you should expect to provide (for the 7(a) loan in particular) include:

• A completed SBA Form 1919  
• Personal financial statements 
• Business financial statements 
• Projected financial statements 
• Ownership and affiliations
• Business license or certificate 
• Past loan records
• Income tax returns for the previous three years
• Resumes for each principal
• Business overview and history with an explanation of why you need the SBA loan 
• Business lease 

If you are seeking a loan to buy an existing business, you may need:

• Current balance sheet and profit and loss statement of the business being acquired
• Federal income tax returns for the previous three years of the business being acquired
• Proposed bill of sale/purchase agreement with terms of sale
• Asking price with schedule of inventory, machinery and equipment, and furniture and fixtures

Requirements for the 504 loan offered through Certified Development Companies (CDCs) and microloans offered by nonprofit, community-based organizations will vary by provider.  

SBA loans are available to cover most business needs, from financing long-term fixed assets to getting a business loan that provides operating capital. Once you fill out the SBA’s brief questionnaire, it should match you with one of the three main types of SBA loans: 

• 7(a) loan (the most common)
• 504 loan (long-term, fixed-rate loan to purchase assets)
• Microloan (loans under $50,000 for start-ups)

Use the SBA Lender Match tool to locate potential SBA-approved lenders near you. You’ll be asked to fill out a brief questionnaire and provide your ZIP code. You should expect an email with a list of potential lenders within two days.

About 800 financial institutions across the 50 states and U.S. territories are SBA-approved, so there will likely be options in your area.

When you're applying for business loans, shop around so you can get the best interest rates and the best match for your needs. Ask questions, get quotes, and compare loan terms and offers.

Once you decide to move forward, your SBA lender will explain exactly what it needs from you. The process may vary by institution, loan type, and loan amount, but you should expect to provide a good amount of documentation and answer questions about your business.

The application process may vary slightly depending on the type of SBA loan you are applying for. Here are more details about the process for applying for the three main types of SBA loans.

The most common type of SBA loan, 7(a) loans can be up to $5 million and can be used for a variety of reasons including to refinance business debt, for short- or long-term working capital, to purchase equipment or furnishings, and more. Your lender can help you decide which type of 7(a) loan best matches your needs.

The main qualifications for an SBA 7(a) loan are that you have a for-profit small business, you can explain how you plan to use the loan, you do not have any debt delinquencies with the U.S. government, and you can demonstrate creditworthiness and ability to repay.

Expect to provide a slew of financial documents to the lender during the application process.

A 504 loan is for long-term, fixed-rate financing up to $5.5 million to purchase assets. To qualify, your business must meet the size standards, have a tangible net worth of less than $15 million, and an average net income of less than $5 million for the last two years. You’ll also be evaluated on your credit history, expertise, business plan, and ability to pay back the loan.

Because 504 loans are provided by Certified Development Companies (CDCs), the application process will be unique to whichever CDC you work with.

The SBA’s microloan is designed for startups looking for smaller loans—up to $50,000. Individual requirements will vary. To qualify, you’ll have to work with an SBA-approved intermediary in your area . These lenders determine the credit qualifications and overall terms of the loan.

In general, you can expect that you’ll have to put up collateral and a personal guarantee as part of the loan agreement.

A personal guarantee is a promise that you’ll repay the business loan from your personal funds if the business is unable to fulfill its debt obligations.

If you don’t think you’ll qualify for an SBA loan or if you want to explore other financing options for your small business, here are some other opportunities for business financing.

• Small business loan with a private lender : Banks, credit unions and online lenders offer their own small business loans , although you may face higher interest rates and more stringent requirements. Most will have requirements involving how long you’ve been in business, your business revenue, and credit score. The first step is to make sure you meet the minimum qualifications.
• Small business line of credit : A line of credit is revolving, meaning you have access to funding if you need it, but you don’t have to borrow it all at once. You can continue tapping into your credit line as needed as long as you have funds available. When you repay your borrowed funds, you can borrow them again.
• Factor loans : If your credit needs work, you may consider a factor loan if you need working capital . You pay a factor rate on the principal, and then make weekly (or sometimes daily) payments until it’s repaid. 
• Merchant cash advance : A merchant cash advance relies less on your creditworthiness, as you are instead taking an advance on your future sales. You’ll pay the lender back automatically through a small percentage of your revenue.
• Business credit card : If you just want access to a smaller amount of credit to help with cash flow, a business credit card could be a good option. Some business credit cards also let you earn rewards that can be redeemed for business travel or cash back.

How Do You Apply for an SBA Loan Online?

With an SBA-approved lender that offers an online application, you start the application process on its website. In addition to answering questions about your business and why you need the loan, you will be asked to scan and upload digital versions of your documents. You may also be able to e-sign parts of the application.

How Hard Is It to Get Approved for an SBA Loan?

SBA loans do have an extensive application process with a lot of requirements. You’ll need to have good credit, solid business financials , and a track record of business history. Plus, some aspects of the application are more subjective, such as the lender evaluating your business plan and how you plan to use the loan amount. Around 62,000 SBA loans were given in 2022.

What Will Disqualify You From an SBA Loan?

Certain types of businesses are not eligible for an SBA loan, including firms involved in lending activities, gambling establishments, and charitable and religious organizations. In addition, not meeting the eligibility requirements will disqualify you from an SBA loan, such as not being a for-profit, U.S.-based business or not meeting the size definition of “small business.” Lastly, you might be disqualified if you don’t meet the lender’s standards for borrowing as it relates to your credit, business financials, or other factors.

What Is the Easiest Loan to Get From the SBA?

In general, when applying for loans in smaller amounts, the qualifications will be less stringent since there is less risk to the lender. For example, a microloan under $50,000, which is offered via nonprofit organizations, will most likely be easier to get than a $3 million SBA loan.

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U.S. Small Business Administration. " SBA Announces End-of-Year Capital Benchmarks Showing Historic Support for Small Businesses Under Administrator Guzman ."

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Best Practices: Landlord Waivers for Leasehold Improvement Loans

• February 3, 2016
• Janet M. Dery

According to Chapter 5, Section V of SOP 50 10 5(H), when substantial loan proceeds from a U.S. Small Business Administration guaranteed loan are to be used for leasehold improvements or a substantial portion of the collateral of an SBA loan consists of leasehold improvements, fixtures, or equipment that will become affixed to real property, the SBA requires a lender to obtain a collateral assignment of lease and a landlord waiver.

A collateral assignment of lease is required to allow the lender to have the ability to find another person or entity who may be willing to assume the loan and the lease for the rest of their respective terms. Since a lender cannot reasonably remove the leasehold improvements it has financed after a default under the loan, this assignment is the best way to realize on the value of the improvements in a liquidation scenario.

On the surface, it sounds like a simple document to obtain. A lender would have the borrower assign its interest in the lease to the lender in an assignment document executed at closing. Unfortunately, the borrower, if it were to take such an action could trigger a default under the terms of its lease. Most leases contain provisions which prevent the tenant from assigning its interest in the lease without the landlord’s prior written consent. Therefore, if borrower does not obtain landlord’s written permission to assign the lease to the lender prior to the execution of the loan documents, the landlord could consider the borrower’s assignment to be a default under the lease.

Additionally, the SBA requires that the landlord provide a 60 day written notice of default to the lender with the option to cure such default. A borrower could not make such a promise for the landlord, so the landlord must consent to provide such notice, on top of consenting to the assignment.

An effective way for the lender to address these needed consents from the landlord is in the landlord waiver form it otherwise provides to the landlord for consideration. Since landlord waivers are required whenever SBA loans are secured with business personal property which is located at a leased location, most lenders have forms that they consistently use which contain the following items required by the SBA. First, the landlord must subordinate or waive its interest in the lender’s collateral. Second, the landlord must notify the lender if there has been a default under the lease by the borrower. Third, the landlord should provide the lender with a reasonable opportunity to cure any default by the borrower. Finally, the landlord must provide the lender with access to the premises to allow the lender to liquidate the collateral. If the notification requirement of the form is revised to require a 60 day notice period, and language whereby the landlord consents to the collateral assignment of the lease to the lender by borrower is added, then the form would be suitable for submission to landlords where leasehold improvements are being financed.

If the leasehold interest of the borrower is a ground lease, the SBA has additional requirements that must be in the ground lease. These requirements include: (i) tenant’s right to encumber the leasehold interest; (ii) no modification or cancellation of the lease without lender’s approval; (iii) lender’s right to: (a) acquire the lease at a foreclosure sale or by assignment and right to reassign the leasehold interest (landlord may not unreasonably withhold consent to reassignment), (b) sublease, (c) hazard insurance proceeds from damage to improvements, and (d) a share in any condemnation proceeds; and (iv) lender’s rights upon default or termination of the lease. If these provisions are not in the lease, then a lender should obtain an amendment to the lease at the time it submits its landlord waiver to the landlord.

As discussed above, the landlord waiver can be a very effective tool for meeting all the SBA’s requirements when substantial leasehold improvements are being financed or are a substantial portion of the collateral. Therefore, a lender should endeavor to include such needed items in its landlord waiver form before providing the form to the borrower and/or landlord. For more information on landlord waivers when loan proceeds will fund leasehold improvements or be substantially secured by improvements and fixtures, contact Janet at [email protected] .

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ThinkSBA is a Nationwide SBA 504 and 7a Loan Brokerage serving small business and entrepreneurs purchasing owner occupied real estate, acquiring a business or franchise or buying out a partner.

Collateral Assignment of Life Insurance Requirement For SBA 7(a) & 504 Loan Programs

Life insurance is a contract between a policyholder and insurer where the insurer promises to pay the insured’s beneficiary an agreed amount upon their death. The most common application is between heads of household and their dependents.

Life insurance is also leveraged by commercial lenders as a risk mitigation tool for loan applicants of privately held, family owned businesses.

Similarly, the SBA requires that loan applicants obtain a collateral assignment of life insurance in favor of the lender when the business is formed as a sole proprietorship or single member LLC and is otherwise dependent on one owner’s active participation.

Examples of businesses dependent on one owner’s participation include businesses where special training or licenses are required such as doctor’s offices, assisted living facilities, contractors, mechanic shops, etc.

The required face value of the insurance policy for 7(a) loans is established by the lender who takes into consideration the operating businesses industry classification code, loan amount, length of loan term and available collateral.

On the other hand, Certified Development Companies (CDC) which fund the 504 2nd Deed of Trust, also known as the Debenture, must require a collateral assignment of life insurance with a face value equaling the Debenture minus the available collateral’s discounted liquidation value based on the following schedule:

• Commercial real property including buildings: 75% of appraised value
• Residential real property including buildings: 80%. of appraised value
• Land only and Equipment: 50% of appraised value
• Leasehold improvements, Furniture and fixtures: 5%. Of appraised value

Now, pay close attention to these three important points.

• A collateral assignment of Term Life insurance is acceptable to meet the SBA’s requirement. No lender should require Universal or Whole Life insurance which are generally more costly.
• A loan applicant may assign to the lender or CDC an existing policy that meets their underwriting guidelines.
• A lender can waive the requirement to obtain life insurance if a licensed insurer provides written documentation that the loan applicant is unable to obtain life insurance. Some lenders require denial letters from a minimum of two licensed insurers.

As a best practice, I recommend loan applicants discuss the requirement to obtain life insurance with their loan broker or SBA business development officer upon or before the loan is submitted to underwriting or is scheduled to be presented at loan committee.

The length of time it takes to obtain life insurance is between one to six weeks, or more depending on the life insurance company’s pipeline density, underwriting practices and the loan applicant’s age and health status.

About Ryan Smith

Ryan Smith is Principal and Founder of ThinkSBA® , and Creator of The My SBA Loan Pro Podcast . Ryan specializes in assisting business owners and entrepreneurs with obtaining financing to purchase owner occupied real estate, acquire a business or franchise, or buy out a partner. Ryan accomplishes this by leveraging over eighteen years experience inside two of America’s top financial institutions.

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SBA 7(a) Landlord Lease, Waiver and Subordination: What You Need to Know

IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities.  Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Mihir Patel of American Momentum Bank ( www.americanmomentum.bank ).

If you’re a small business owner looking to secure financing through the SBA 7(a) loan program, you may need to obtain a landlord waiver and subordination from your commercial landlord. Here’s what you need to know about these requirements:

What are the term requirements for a lease?

The lease must have a term that extends through the term of the SBA 7a loan. The lease can extend for the entire term OR have an initial term with options to renew. For example, if your SBA loan has a 10-year term you are able to do a 5-year lease with an option to renew for an additional 5 year term.

What is a Landlord Waiver?

A landlord waiver is a document that your commercial landlord signs to acknowledge that you are pledging their property as collateral for your SBA 7(a) loan. The waiver gives your lender permission to place a lien on the property in the event that you default on the loan.

Why Do You Need a Landlord Waiver?

The SBA requires a landlord waiver as a condition of funding for any 7(a) loan that involves the use of leased property as collateral. This ensures that the lender has the right to seize and sell the property in the event of a default.

What is Subordination?

Subordination refers to the order in which liens are paid off in the event of a default. A subordination agreement is a document that your landlord signs to acknowledge that their lien on the property is secondary to the lender’s lien. This means that if the property is sold in a foreclosure, the lender will be paid first, and any remaining proceeds will go to the landlord.

Why Do You Need Subordination?

Subordination is necessary because the SBA requires that their lien on the property be first in priority. This ensures that the lender can recover their funds if the property is sold, even if the landlord has a claim on the property.

How to Obtain a Landlord Waiver and Subordination?

To obtain a landlord waiver and subordination, you’ll need to contact your commercial landlord and provide them with the necessary documentation. This typically includes a copy of your loan application, a copy of the appraisal report, and a copy of the loan commitment letter. Your lender may also provide you with a sample waiver and subordination agreement that you can use as a template.

It’s important to begin the process of obtaining a landlord waiver and subordination early in the loan application process, as it can take several weeks to obtain these documents. Working with a reputable lender who has experience with SBA 7(a) loans can help streamline the process and ensure that you are able to secure the financing you need to grow your business.

If you have questions relating to the content of this article or the 7 (a) Small Business Administration guaranteed loans facilitated by American Momentum Bank, Mihir Patel would welcome the opportunity to answer them.  Mr. Patel can be reached at (910) 536-5170 and [email protected] .

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, accounting, legal, and financial planning communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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