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Why SBA Loans Are Key to Small Business Acquisitions
What you missed on How2Exit This week
Ronald Skelton
September 17, 2024
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E243: Why SBA Loans Are Key to Small Business Acquisitions – Ray Drew Tells All
About the Guest(s):
Ray Drew is a distinguished SBA lender with a career spanning over a decade. Beginning his journey at the young age of 22, Ray has carved a niche for himself in the small business financing sector, emphasizing SBA 7(a) loans. Throughout his career, he has facilitated millions in financing for small business acquisitions. Currently, he is a leading figure at Trueliant Federal Credit Union, a nationwide SBA lender. Ray is also known for producing educational content on his YouTube channel, SBA Ray, and hosting the podcast, The Art of SBA Lending.
Episode Summary:
In this episode of the How2Exit Podcast, host Ronald Skelton reconnects with Ray Drew, a preeminent figure in SBA lending. Ray, who has seen a significant rise in SBA-backed business acquisitions since the onset of the COVID-19 pandemic, shares his extensive knowledge about the SBA loan process, the prerequisites for borrowers, and the evolving landscape of small business purchases. They dive into the nuances of acquiring businesses, the importance of relevant experience, and the due diligence required to ensure successful financing and acquisition.
Ray provides an in-depth look at the SBA loan process, detailing everything from pre-approval to closing. He highlights common pitfalls buyers face, such as lack of industry experience and how they can navigate these challenges. Ray also discusses his personal experiences with complex deals, emphasizing the importance of having a supportive and knowledgeable lender. The episode is a treasure trove of insights for anyone considering the acquisition of a small business through SBA loans, offering actionable advice and real-world examples of successful and challenging acquisitions.
Key Takeaways:
Understanding SBA 7(a) Loans: SBA 7(a) loans are a critical tool for small business acquisitions, offering favorable terms and support for borrowers who may not qualify for conventional loans.
Importance of Experience: While relevant industry experience isn't always mandatory, having managerial skills and a solid understanding of business operations significantly increases the likelihood of loan approval and business success.
Thorough Due Diligence: Engaging in comprehensive due diligence and having a clear understanding of the business operations and potential challenges is crucial for any acquisition.
Flexibility and Creativity in Financing: There are various ways to structure deals, including seller notes and bringing in partners to shore up experience gaps, offering flexibility to buyers.
Choosing the Right Lender: Not all SBA lenders are the same. It’s essential to work with a lender who understands your business model and has a track record of financing similar businesses.
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