Are you thinking of buying a business but struggling with down payment funds? If your family or friend is willing to gift you the money, you may wonder if it's possible to get financing with it. In this blog post, we will explore the possibility of using gifted funds for equity injection in business acquisitions and how SBA financing can be an ideal option.

SBA Financing for Small Businesses

The Small Business Administration (SBA) is a government agency that provides loans, loan guarantees, and other forms of financing to small businesses. As per the video, 85% of all small businesses in the USA are financed with SBA financing, making it an ultimate tool for small business owners.

One of the great features of SBA financing is that they allow equity injection to be completely gifted. This means that if you are buying a business, and your family or friend gifts you the money needed for the down payment, it can be used for equity injection. However, there are certain guidelines to follow to ensure eligibility.

Guidelines for Using Gifted Funds for Equity Injection

Before using gifted funds for equity injection, the following guidelines must be met:

• The business should be in operation, and its financials should be solid.
• The equity injection should be used to service the loan amount.
• The gifted funds should not be a loan.

If these guidelines are met, then using gifted funds for equity injection can be a feasible option. The SBA likes cash flowing businesses, and if you're buying a business that generates revenue, then the chances of getting financing increase.

Advantages of Business Acquisition

There are plenty of reasons why buying an existing business can be a great opportunity, especially for new entrepreneurs. Firstly, the business is already set up, and you don't have to worry about starting from scratch. Secondly, there are plenty of baby boomers retiring and selling their businesses, creating ample opportunities for new buyers. Lastly, with SBA financing, you can be creative and flexible in structuring the deal, making it possible to buy a business with little money down.

How to Get Started

Navigating the guidelines and rules of SBA financing can be overwhelming, especially for new entrepreneurs. However, you don't have to do it alone. Bo Eckstein, the host of the Investor Financing Podcast, offers a free strategy call where he helps investors come up with a strategic finance plan to achieve their goals. His team can help you package the deal and bring it to the right bank to work towards getting an approval and closing on the business.

If you're interested in discussing your financing options, book a call with Bo at bookwithbo.com.

Conclusion

Using gifted funds for equity injection in business acquisitions is acceptable under certain guidelines, as per SBA financing rules. Business acquisitions can be a great opportunity for new entrepreneurs, and SBA financing can make it possible to buy a business with little money down. However, navigating the guidelines and structuring the deal can be daunting, which is why seeking the help of experienced professionals like Beau Eckstein can be beneficial.