SBA Loans for Liquor Stores: Financing an Existing Store Purchase
Most buyers of existing liquor stores finance a large share of the purchase. Because much of a store’s value is in its cash flow, inventory and location rather than in hard collateral, many buyers consider SBA-backed financing, which can allow longer repayment terms and lower down payments than some conventional loans. SBA loans for liquor stores are commonly considered for purchasing existing, operating stores, sometimes together with the building.
This guide explains how SBA financing may be used for liquor store acquisitions, what lenders review and how to prepare. It focuses on buying an existing store, not opening a new one. Eligibility depends on current SBA program requirements, the facts of the transaction and lender review, and program rules change, so confirm current requirements with your lender.
How SBA Lending Works
SBA loans are made by participating lenders and partially guaranteed by the U.S. Small Business Administration. The guarantee reduces the lender’s risk, which can make it possible to finance business acquisitions with longer terms than many conventional business loans. Borrowers must meet both the lender’s credit standards and SBA eligibility requirements.
How SBA 7(a) May Be Used
Depending on eligibility and lender approval, SBA 7(a) financing may be considered for:
- Purchasing an existing liquor store, including goodwill, fixtures and equipment
- Inventory acquired at closing, where the lender and program permit
- Purchasing the business together with owner-occupied real estate
- Working capital as part of the acquisition
- Certain closing costs
When the building is included, see our page on SBA 7(a) business real estate loans. Our article on liquor store inventory explains how inventory is typically handled at closing.
Eligibility Considerations Specific to Liquor Stores
SBA eligibility rules look at the nature of a business and its revenue sources. Some liquor stores earn income from lottery sales or other gaming-related activities, and SBA rules address certain gambling-related revenue. Whether and how these sources affect eligibility depends on current program rules, how the revenue is earned and reported, the facts of the transaction and lender review. Buyers of stores with these revenue sources should raise them with their lender early. Our guide to liquor store lottery and tobacco sales discusses how these sales are evaluated.
Licensing and SBA Financing
Lenders generally want assurance that the buyer will be properly licensed to operate. Depending on the jurisdiction and the lender, funding may be coordinated with licensing approval, and lenders may require evidence that required approvals have been obtained. Licensing requirements and timing vary, so plan for them when setting closing dates. See our guide to liquor license transfer.
Equity Injection and Seller Notes
SBA acquisitions generally require a buyer equity contribution. Depending on current SBA rules and lender policies, a seller note may count toward part of that requirement under certain conditions. Our article on buying a business with 5% down using SBA financing explains how seller notes may be treated.
What SBA Lenders Look At
- Documented cash flow: tax returns and financial statements that support the price and loan payments
- Sales records: point-of-sale reports, bank deposits and purchase records that support reported results
- Licensing: the path to the buyer being licensed and the store’s compliance history
- The lease: remaining term, renewal options and assignment
- Buyer experience: retail, management or business ownership background
- Credit and liquidity: personal credit history and reserves after closing
- Guarantees and collateral: personal guarantees and available collateral as required
Preparing Your Request
- A letter of intent or purchase agreement
- Seller tax returns and financial statements for several years
- Point-of-sale reports and bank statements
- Licensing information and your plan for obtaining approval
- The lease and any landlord correspondence
- Your personal financial statement, tax returns and resume
- A business plan for operating the store
Estimate payments before applying with our SBA loan calculator.
Is SBA Financing the Right Fit?
SBA financing can be a strong option for many liquor store acquisitions, but it is not the only one. Some buyers with strong credit and larger down payments may consider conventional financing, and many deals combine bank and seller financing. The right choice depends on the store, the buyer and the terms available.
US Professional Funding helps buyers evaluate SBA and conventional financing for the acquisition of existing liquor stores. Learn more about our liquor store acquisition financing.
