I once watched a deal die at month seven. Seven months of inspections, environmental reports, lease reviews, and enough paperwork to choke a copy machine. The buyer swore up and down that financing was locked. Spoiler alert: it was not. The bank pulled the plug two weeks before closing, and I was left standing in an empty parking lot wondering where my summer went.
That experience taught me a lesson I now treat like gospel in commercial real estate. Before you invest serious time with any buyer, verify they can actually get SBA financing. Not “pre-qualified.” Not “the bank loves them.” Verified. Here is how I do it now, and how you can save yourself months of pain.
Why SBA Deals Stall Out (And Why It Hurts the Seller)
SBA loans are fantastic tools for buyers. They are also unforgiving on eligibility. The Small Business Administration has strict rules on business size, owner occupancy, credit history, and cash injection. A buyer can look rock solid on the surface and still get bounced for reasons nobody checked upfront.
Here is the ugly truth from my side of the table:
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SBA lenders take 60 to 90 days to underwrite, sometimes longer
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Buyers often confuse “pre-qualification” with an actual commitment
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One credit blemish or undocumented income source can sink the whole file
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Sellers who wait find out too late that the buyer was never viable
Step One: Ask for a Lender Pre-Approval Letter (Not a Pre-Qual)
There is a big difference between these two documents. A pre-qualification is basically a lender saying “sure, you seem nice.” A pre-approval means the lender reviewed credit, financials, and tax returns. Ask for the letter directly from an SBA-approved lender. If the buyer cannot produce one, hit pause immediately.
Step Two: Confirm the Buyer’s SBA Eligibility Basics
You do not need to run a full audit, but you should confirm the big items:
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Business size standards: Does the buyer’s business fall under SBA size caps for the industry?
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Owner occupancy: For real estate deals, the buyer typically must occupy at least 51 percent of the property
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Cash injection: Most SBA 7(a) deals require a 10 percent down payment from the buyer’s own funds
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Credit and character: Lenders pull personal credit and review criminal and financial history
A quick conversation with the buyer’s lender can confirm all of this in about fifteen minutes. Do it early.
Step Three: Talk to the Lender Directly
This step feels a little bold, but it works. Ask the buyer for permission to speak with their loan officer. Then ask three questions:
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Has this buyer submitted a complete application yet?
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What conditions remain open on the file?
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What is the realistic timeline to a commitment letter?
If the loan officer hesitates on any of these, treat it as a red flag. Pros answer directly.
Step Four: Require a Financing Contingency With Teeth
Put a deadline in the purchase agreement. Something like 45 days for the buyer to deliver a written loan commitment. No commitment, no deal, and the earnest money stays put. This one clause has saved me more headaches than any other tool in my kit. It forces the buyer to move with urgency and protects you if they cannot deliver.
Step Five: Watch for These Warning Signs
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Buyer avoids sharing financial statements or tax returns
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Lender name changes every time you ask
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Timeline keeps slipping with vague excuses
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Down payment “will come together later”
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Buyer cannot explain basic SBA terms like guaranty or debenture
Trust your gut. If something feels off, it probably is.
The Bottom Line
Time is the most expensive thing you own in a deal. Protect it. Verify financing early, verify it in writing, and verify it with the lender directly. Do that, and you will never again spend seven months babysitting a deal that was never going to close.