Lots of state-specific options, care to share where you’re located?

SBA lenders are agnostic on your entity structure, but nobody borrows under a sole prop. The answer is almost always an LLC. A single member LLC can roll up to your personal return under Schedule C while still affording some benefits of a separate legal entity.

Yes, SOP 50 10 7.1 allows 7a to 7a refinances under delegated authority for PLP lenders. If you have a 7a real estate loan you also can refinance with a 504, which has been possible for a few years.

Seller financing (or buying in cash) is the only option, you can’t get a bank or SBA loan with negative cash flow. WTF are you paying for when the primary value to a business is a cash flow multiple?

You can now refinance a 7a loan with a new 7a loan as of Nov 15th. A fixed rate lender can drop your rate to ~8%. Most variable rate lenders can’t drop your rate as they sold the 75% guaranteed portion to investors,

A single member LLC isn’t a bad idea, and it wouldn’t require a separate tax return. However, it has nothing to do with deducting expenses vs. owning it personally.

What is and isn’t in writing re: your business arrangement?

On an SBA 7A loan all lenders are subject to the same rules, but most are variable rate lenders as they sell the 75% guaranteed potion and typically must achieve Prime + 2 - 3.00%. Otherwise, they can’t get the return to make their business model work. Please also keep in mind that these lenders all pay a point to referral sources (a big part of the Prime+ business model). And yes, that means on a max $5M deal they pay out $50k to the referral source.

A fixed rate lender puts the entire loan on the balance sheet, and can offer a much lower spread over Prime or do a 5 - 25 yr fixed rate depending on the deal. Many variable rate lenders will say that all/most SBA loans are floating rate but that isn’t true. However, the fixed rate lenders are typically more conservative and may limit the unsecured amount per loan/require more cash in, etc. I think right now a 5-yr lock then Prime + 1.00% is an attractive structure as you get the best of both worlds.

You are smart to shop it, and it’s perfectly ethical to do so—particularly if you are transparent about it. Good luck!

If the bank isn’t comfortable financing them, it seems risky for you to be the bank. You’ll want to engage counsel and your CPA if you are serious about carrying the note for the purchase.

You are correct with SOP 50 10 7, but luckily 7.1 is effective Nov 15th and once again you can go 25 yrs when 51% or greater of the project cost is real estate.

What would be a negative for you as an owner for your employees to finance with a bank? You can carry a note for 7.5% of the purchase price and they can buy with just 2.5% down (assuming SBA financing).

If you have the cash it’s certainly possible, but it might be harder to get approved without secondary income as the startup will need to generate enough cash flow to cover all business and personal expenses. If it’s not a franchise you’ll also see a lot of lenders requiring 20 - 30% down instead of the minimum 10%.

What’s the proposed purchase price? If you’re in the U.S. and can utilize SBA financing the Seller can carry a note for 7.5% of the purchase price (must be standby or interest-only for 2 years, then amortized to zero over the remaining term with no balloon) and you only need to come up with 2.5%.

You’re kind of in purgatory for bank lending as SBA and small business lenders will generally want to see a filed tax return showing profits. Often it’s easier to get startup funding then obtain funding at your stage.

There are almost unlimited short-term non-bank financing companies but the cost of capital is eye watering.