Evaluating Owner Equity for a Small Business Loan

Owner equity is an important piece of evaluation criteria for SBA loans.

As a new small business owner applying for financing, you may be overwhelmed by the amount of criteria that a Houston SBA lender uses to evaluate a loan. While I have discussed small business loan criteria before, I want to dive a little deeper into one specific aspect: owner equity.

Often referred to as “skin in the game”, owner equity in the business is an important part of any SBA loan application. Fortunately for small business owners, qualifying equity can be made up of three different types of investment including:

Dollar Investment: Also known as the “down payment”, this is the most common form of owner equity.
Outside Assets: If the business owner has an asset outside of their business’ balance sheet (i.e. property), he or she can use this as collateral for the loan.
Seller 2nd Lien: The seller of the property or small business can take a second lien and avoid repayment until after the SBA loan has been paid off.

About Bruce Hurta

Bruce Hurta has extensive experience in Small Business Lending. He has served in a number of commercial lending and banking capacities in his career including, President of a Houston-area community bank for 6 years, managed Independence Funding Company, a non-bank start-up in 1994, where he developed his SBA lending expertise. Bruce spent 4 years in Finance as a bank examiner for the Texas Banking Department, 7 years in executive management at two community banks, and 25 years as a specialty SBA Lender. He is active in the commercial realtor and business brokerage communities, along with various business and industry organizations. Bruce Hurta is Vice President - Government Guaranteed Lending in Houston, TX for Ameris Bank SBA and USDA Lending nationwide. Ameris Bank offers SBA and USDA loans for small businesses to purchase or construct new buildings for their small business operations, to acquire a business, to expand a business or to buy out a business partner.

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