When you’re ready to buy out your business partner, securing the right financing is crucial. At FNB Small Business Finance, we understand the importance of smooth transitions in ownership. Our experienced team can create a customized solution that meets your business and personal needs.
SBA partner buyout loans are a popular option for small business owners due to an array of benefits that aren’t found in conventional lending solutions. The experienced team at FNB Small Business Finance understands the nuances of partner buyouts and is committed to guiding you through the process with expertise and personalized advice.
Solutions
- Up to 100% financing available
- Up to $2MM unsecured, 10-year term, no prepayment penalty
Benefits
- Loan proceeds can include working capital, new FF&E, and other business needs.
- No loan covenants, no deposit requirements
- Quarterly variable, 3-, 5-, or 10-year fixed rates
- You choose your rate structure
FAQs
Check out the FAQs below for more information on the partner buyout process. If your question isn’t addressed here, reach out to a Business Development Officer today.
- What type of SBA loan is used to finance a partner buyout?
Typically, the SBA 7(a) loan is used to structure partner buyouts.
- How long is the term of the loan?
A partner buyout loan typically offers a 10-year term with no prepayment penalty.
If real estate is included in the transaction, depending on how the transaction is structured, the term may be longer.
- How much money do I need to buy out a partner?
SBA allows for 100% financing for a partner buyout. We can recognize the buying partner’s existing equity on the company balance sheet.
- How can seller notes be structured?
Sometimes a seller note is part of the financing package on a partner buyout. There are tax advantages to the selling partner to do this. We would typically want seller notes to be structured with a 10-year amortization with a balloon payment no earlier than 5-years.
If the historic cash flow of the business supports it, payments can begin immediately on the seller note. If there are challenges on the cash flow, we may look for a 2-year standby on the seller note.
- What are your primary credit underwriting requirements for a partner buy out loan?
Historic revenues and cash flow on the business
Nature of the business, markets it serves
Historic roles of both the buying and exiting partners in the business
We will require a written business plan and 2-years of projections with written assumptions to be prepared by the buyer
Buyer’s personal credit
- How long does the process take to close?
- Your BDO will provide you with a Preliminary Closing Checklist that you can work on while the credit process is going on. The goal is to be able to provide as much on that checklist at approval to get closing off to a jump start.
- You will be provided with a full closing checklist once your Commitment Letter is returned by you. We will be prepared to close within 5 business days of when everything on that list has been submitted, reviewed and approved.
From submission of a complete loan package to credit underwriting to a credit decision normally takes about 10 business days.
Once approved, the closing process should take 30-45 days.
- How do I get started?
We recommend as a best first step that you reach out to your nearest FNB Small Business Finance Business Development Officer who will schedule an initial call with you.
Pre-Application Checklist:
Ready to explore your options for SBA partner buyout loans? The following checklist will help you prepare for an initial call with one of our SBA lending experts.
- Estimated project costs
- Three years of tax returns, interim financial statements on existing business(es) including Income Statement, Balance Sheet, Debt Schedule
- Three years of personal tax returns – all owners 20%+
- Personal Financial Statement – all owners 20%+
