SBA Loans for Restoration and Cleaning Companies: Financing an Existing Business Purchase
Buying an established restoration, remediation or commercial cleaning company can require significant capital: the purchase price, closing costs and enough working capital to carry the business through the transition. For many buyers, SBA-backed financing is one of the options worth evaluating. SBA loans for restoration companies and cleaning businesses can, depending on the transaction, allow longer repayment terms than some other financing and may be combined with seller financing and the buyer’s own equity.
This article is general information about financing the purchase of existing, operating restoration and cleaning companies. It does not address starting a new business or financing equipment on its own. SBA eligibility depends on business structure, use of proceeds, program rules and lender review, and every loan is subject to lender approval. Nothing here is a commitment to lend or legal, tax or financial advice.
How SBA 7(a) Financing Can Be Used in an Acquisition
The SBA 7(a) program can be used for a range of business purposes, including, where eligible, the acquisition of an existing business. Depending on the deal, proceeds may also be used for working capital, certain equipment included in the purchase and, in some cases, real estate the business occupies. Our page on SBA 7(a) loans explains the program in more detail.
What Lenders Evaluate in a Restoration or Cleaning Acquisition
- Documented cash flow: whether historical tax returns and financial statements support the proposed debt
- Revenue mix: how work arrives, including the mix of referral, direct, insurance-related and contract revenue
- Concentration: reliance on a small number of referral sources, programs or customers
- Receivables: how long the company waits to be paid and how consistently it collects
- Storm or event-driven revenue: whether recent results include unusual years that may not repeat
- Buyer experience: the buyer’s relevant industry or management background
- Transition plan: how key staff, referral relationships and licenses will be handled
Our article on restoration business loan requirements covers these topics and the documents lenders request.
Purchase Price and Valuation
Lenders will review whether the price is supported by the business’s documented earnings. A storm-boosted year, heavy dependence on a single referral source or owner-dependent relationships can all affect how a lender views the price. Our guide to restoration company valuation explains these factors.
Equity and Seller Financing
Buyers are generally expected to contribute some of their own funds, and the amount depends on the program rules, the lender and the transaction. In some deals, a seller note may be part of the structure, subject to program rules on its terms and subordination. See our article on restoration business seller financing.
Certifications, Programs and Licenses
Lenders may ask how the business will continue operating after the sale. Insurer or program relationships, preferred-vendor status, certifications and licenses should not be assumed to transfer to a new owner. Buyers should understand what will need to be re-established and build that into their plan.
Working Capital Needs
Restoration companies may pay crews, subcontractors and suppliers long before they collect, and commercial cleaning companies carry payroll ahead of customer payments. Lenders may consider whether the financing package includes enough working capital to support operations during the transition.
Estimating Payments
Before speaking with a lender, buyers can estimate potential payments using our SBA loan calculator. Estimates are for illustration only; actual terms depend on the lender, the program and the transaction.
Preparing a Strong Request
- Seller tax returns and financial statements for several years
- Revenue by job type, referral source and customer
- A receivables aging report
- The buyer’s resume, personal financial statement and tax returns
- A purchase agreement or letter of intent
- A transition plan covering staff, referral sources and licensing
US Professional Funding helps buyers evaluate financing for the acquisition of existing, operating restoration and cleaning companies. Learn more about our restoration business acquisition financing.
