Understanding Equity Injection Requirements and Creative Financing Options [SBA 7a Loans]
The video discusses equity injection requirements for SBA loans and creative financing options for small business owners. Equity injection refers to the amount of money a borrower contributes to a project as a percentage of the total project cost.
Lenders require equity injection to mitigate their risk and to ensure the borrower has a financial stake in the project. Equity injection requirements for SBA 7A loans vary depending on the loan purpose. For instance, for the acquisition of an existing business, a borrower generally needs to contribute at least 10% equity injection. However, banks may overlay this requirement, so it's best to work with a commercial mortgage advisor who can help you navigate and find the best loan option for your business.
The video also discusses creative financing options, such as negotiating with sellers to leave a portion of their equity on standby, bringing in partners to own less than 20% of the business being acquired, or finding a family member to gift the equity injection.
The video emphasizes that small business owners can acquire businesses using other people's money, which is an excellent opportunity to take advantage of, especially with many baby boomers retiring and not having a succession plan for their businesses. Finally, the video encourages viewers to reach out if they have any questions about SBA loans or general financing.
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Understanding Equity Injection Requirements and Creative Financing Options
Timestamps:
(00:16) - Explanation of equity injection in simple terms
(00:28) - Importance of equity injection for lenders to mitigate risk
(00:39) - Equity Injection Requirements for SBA 7A Loans
(00:48) - Banks may add overlays to SBA guidelines
(01:05) - Working with a Commercial Mortgage Advisor
(01:16) - Helping clients find the best loan options
(01:25) - Creative Financing Options for Meeting Equity Injection Requirements
(01:37) - Negotiating with sellers to leave equity on standby
(02:06) - Bringing in partners who don't need to guarantee or go on the loan application
(02:20) - Getting a gift of an equity injection from a family member
(02:35) - Buying "Boring" Service-Based Businesses Using SBA Financing
(02:44) - Buying a tree trimming business with no personal money
(03:12) - Investments for people who want to operate "Boring" Service-Based Businesses
(03:27) - Bringing in the equity injection from investor partners
(03:41) – Most business owners do not have a succession plan
(03:45) – Buy a great business that’s going to be around forever and grow revenue
(03:52) - Buy a cash flow stream using other people’s money
(03:59) - A great time to take advantage of this kind of business acquisitions
(04:00) - Go to investorfinancingpodcast.com/ask to ask other questions
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💥 Thanks for watching 💥
#equityinjection #SBAfinancing #creativefinancing
About Beau: Beau Eckstein is a real estate entrepreneur, TV personality, and commercial mortgage advisor, specializing in construction financing and multi-family lending.
🎥 The video interviews we do on IFP will help you scale your real estate business and learn how to finance your all your projects.
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