I'm getting ready to sell my business and have been talking to buyers. Several of them mention they have 'SBA pre-approval.' I'm not sure how much weight to give that. Does pre-approval actually mean anything, or is it just a preliminary step before the real underwriting? I want to avoid wasting time with buyers who aren't fully approved. Would appreciate hearing from anyone who has been through this.
SBA Loans
SBA pre-approval vs full loan approval: What is the real difference?
Pre-approval is essentially a soft commitment. It means the lender has looked at the buyer's financials and thinks they might qualify, but it hasn't gone through underwriting. Full approval involves a deeper review of the business, collateral, and buyer's credit. So no, pre-approval doesn't guarantee they can close.
I sold my last business and the buyer had pre-approval. It still took 90 days to get final approval. It was frustrating but we got there. The pre-approval was just the starting line.
From what I understand, pre-approval means the lender has reviewed the buyer's credit and financials and is willing to proceed. Full approval means the loan is actually approved and ready to fund. But there are conditions in both stages.
A lot of buyers throw around 'pre-approved' to sound more credible. I'd ask for a letter from the lender that spells out the terms and conditions. If they cant produce that, it's probably just a conversation they had.
I'm a buyer, and I can tell you that pre-approval is only as good as the lender. Some lenders give them out easily. Others are more thorough. Ask which lender they're working with and maybe do a quick check.
Even full approval can faall apart. I had a deal where the buyer was fully approved, and then the bank changed their mind at the last minute. It's not a guarantee.
The key difference is that pre-approval dosn't include the business appraisal or a full review of the seller's financials. That's a big part of full approval. Pre-approval is just a quick sanity check on the buyer.
I wouldn't ignore pre-approval completely. It does show that a lender has looked at the buyer and is interested. But it's not the same as a commitment to lend. I'd treat it as a positive sign but keep the deal contingent on full approval.
Be careful because pre-approval can expire. If the buyer delays, they might have to get re-approved and the terms could change.
I've seen both. In my experience, pre-approval is more of a marketing tool. It's a signal, but not much more. You should still vet the buyer's financials and the lender.
The real difference is that full approval means the loan is approved, but there are still closing conditions. Pre-approval is juust a preliminary step. I'd ask the buyer for a pre-approval letter and maybe call the lender to confirm it's genuine.
I've been on both sides. Pre-approval is quick and cheap. Full approval takes more time and documentation. If a buyer is serious, they should be willing to get full approval before you take your business off the market.
Can anyone share how long full approval typically takes after pre-approval? I'm in a similar situation.
Depends on the lender. Usually 30-60 days after you have a signed purchase agreement. But it can be longer if there are issues with the business financials or the appraisal