Pros and Cons of SBA Loans for FedEx Routes for Sale

Photo by Chris Liu-Beers

What are the normal terms of debt from the SBA?

The US Small Business Association (SBA) is a government agency that spurs entrepreneurship and economic growth. They are most well known for their government-backed loans.

What are the benefits of SBA loans?

  • These loans are easier to secure for individuals with a limited or mixed credit history.

  • While many conventional loans require individuals to repay the debt within five years, SBA loan recipients may have an amortization schedule of up to 10 years.

  • SBA loans are more likely to only require a 20% down payment (versus a 25% or more down payment on conventional loans).

What are some concerns about SBA loans?

  • These loans are often incredibly expensive due to the origination fee. This fee is essentially how much the bank charges to process this loan. In our experience the SBA charges 5% of the borrowed amount (and rolls that fee into the loan) whereas most conventional loans charge 0.5-1% of the amount borrowed.

  • Interest rates for SBA loans are often 2-4% higher than conventional financing rates.

  • The SBA aggressively pursues a personal guarantee/collateral which may include your home/car or any other valuables.

  • The SBA loan approval process is slower than other types of financing (about 60 days in our experience versus 30 days for conventional financing sources).

Because of its lengthy approval process, some sellers do not prefer offers from buyers planning to use SBA financing. That said, an excellent offer may change their mind so it’s critical you work with our team to distinguish yourself as a buyer and prepare an appealing offer.

We do have many sellers, however, that are open and willing to accept offers from buyers using SBA loans. We keep a running list of routes for sale open to SBA financing. And as we noted, those with SBA financing may not be limited to this list. Talk to our team for more details.

Please note: our team does not provide financing, but we do provide guidance about the process of buying a FedEx Ground route for sale. We can help you better target a listing that will meet your financing and monthly cash flow goals. We can also help you evaluate the financials of a route for sale. Finally, we have a network of lenders that provide financing and we can help direct you to the right lender for your specific needs.