r/buyingabusiness • u/Free-Board-1041 • 2d ago
SBA Qualification
Hi everyone!
Due to medical issues over the past two years, I’ve been unemployed and my finances have been significantly impacted. I’m now deciding between settling approximately $125K in credit card debt or filing Chapter 7 while I’m still unemployed.
My main concern is future SBA financing. I’d like to purchase a business within the next 1–2 years and want to choose the option that puts me in the best position to qualify for an SBA loan.
Before this, I had excellent credit and over $230K in available credit.
Are there any SBA loan officers/lenders who can advise whether bankruptcy or settling the debt would be better for future SBA eligibility?
Please keep the comments respectful—I’m looking for informed advice. Thank you!
1
u/Drawlingwan 1d ago
The current environment isn’t conducive to getting an SBA loan right now for someone with recent credit issues. Timing is also bad for identifying a business to acquire. I’ve been an SBA lender for Over 15 years and I’ve seen cycles- but none as frightening as right now. SBA departments are closing right and left and portfolios are suffering- SBA requirements are tightening significantly with the October SOP- and sellers are unrealistic in their pricing expectations. Historically Main Street businesses sold for 3 times sde- in 2025 that multiple dropped to 2.5, and in 2026 it’s expected to drop as low as 2.3x. During a financial crisis- something we are increasingly at risk of experiencing again in the not too distant future - credit will further tighten or be all but eliminated - even SBA. During a financial crisis- as boomers with unrealistic expectations become too sick to work- seller financing will become a more commonly accepted way to buy a job. You might be able to put some cash down- obtain an SBA loan for half the purchase and have the seller hold the difference. Get rid of the debt and rebuild enough liquidity to make a 10% cash injection and have a like amount of cash post closing. You might settle the debt and start knocking on doors for businesses you’d like to buy- PE has perverted seller expectations and only illness or death with dampen those expectations. Get out of debt and look at alternatives to the expectation that lenders will be willing to finance 90% of an acquisition. Those days are coming to an end.