September 2, 2024
Navigating the New SBA Rules: What Shoe Retailers Need to Know
By Alan Miklofsky
As of August 1, 2023, several significant changes to Small Business Administration (SBA) rules have taken effect, impacting how small businesses, including shoe retailers, can access financial support. Understanding these updates is crucial for ensuring that your business can make the most of the available opportunities.
One of the most important changes is the expansion of eligibility criteria for SBA loans. This adjustment allows more small businesses, including those in niche markets like shoe retail, to qualify for SBA-backed financing. The new rules increase the threshold for what constitutes a “small business,” meaning that more retailers can now benefit from SBA programs. For shoe retailers who have seen their business grow but still operate within the small business framework, this could be a game-changer.
The SBA has also introduced a more streamlined application process. Retailers who have previously found the SBA loan process cumbersome may find the new system more user-friendly. The SBA has reduced paperwork, simplified forms, and accelerated the approval timeline. For busy shoe retailers, this means you can spend less time on applications and more time focusing on your business.
For those considering expanding their operations, perhaps by opening a new store or renovating an existing one, the changes to the 504 Loan Program are particularly relevant. The SBA has increased the loan amount available for real estate and equipment purchases, offering shoe retailers greater flexibility in how they grow their businesses. Whether you’re looking to invest in a new storefront or upgrade your current inventory management system, these changes could provide the financial boost you need.
Another critical update involves disaster assistance. The SBA has broadened the scope of its disaster loan programs, making it easier for businesses affected by natural disasters to secure funding. With the unpredictable nature of weather and other catastrophic events, shoe retailers now have a more reliable safety net to fall back on if their operations are disrupted.
Finally, the SBA has reaffirmed its commitment to supporting businesses in underserved markets. This includes minority-owned businesses, women-owned businesses, and those in economically disadvantaged areas. If your shoe retail business falls into one of these categories, there may be additional resources and programs available to you under the new rules.
The recent changes to SBA rules present both opportunities and challenges for shoe retailers. By staying informed and taking proactive steps, you can ensure that your business continues to thrive in this evolving landscape. Whether you’re looking to expand, streamline operations, or safeguard against unforeseen events, these new SBA rules could provide the support you need.
Did you know this?
The SBA can finance a partial buyout of a company under certain conditions. The SBA's 7(a) loan program, which is the most commonly used, allows for financing a change of ownership, including the partial buyout of a partner or shareholder. However, the buyout must meet specific criteria to qualify:
Ownership Transfer: The loan must result in the buyer(s) owning 100% of the business after the buyout is completed. For a partial buyout, this typically means that if one partner or shareholder is being bought out, the remaining owner(s) will end up with complete control of the business.
Use of Funds: The SBA requires that the funds be used for legitimate business purposes, such as the buyout of an existing partner to facilitate succession planning or to consolidate ownership. The transaction must be arms-length, meaning it should be based on fair market value and not involve related parties unless properly documented.
Goodwill Financing: If the buyout includes intangible assets like goodwill, the SBA allows this to be financed but will generally require an independent business valuation if the goodwill portion is significant.
Loan Terms: The terms of the loan, including the interest rate, repayment period, and down payment, will be similar to those for other SBA 7(a) loans. The business must also demonstrate that it has sufficient cash flow to support the debt payments.
Eligibility: The business must meet the SBA’s eligibility criteria for small businesses, including size standards, and the buyer(s) must be creditworthy.
In summary, the SBA does support financing for a partial buyout, but the transaction must result in one or more individuals or entities holding full ownership of the business after the buyout is complete. It’s advisable to consult with an SBA-approved lender to understand the specific requirements and structure the buyout properly.
Additional information can be found at: https://www.sba.gov/article/2023/08/10/business-loan-program-improvements#:~:text=On%20August%201%2C%202023%2C%20SBA,504%20fixed%20asset%20loan%20programs
If you haven’t already, now is the time to review your business plans and consider how these changes might impact your strategy. Reach out to your financial advisor or a local SBA representative to explore your options and make the most of the new regulations.
As a business consultant focused on the shoe business, armed with my experience, I can help you create a plan of action. You can reach me at miklofskyalan@gmail.com, or by text at 520-490-5290