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SBA 7(a) Loans for Tax Preparation Firms
Tax preparation firms can use SBA 7(a) financing to buy real estate, acquire a competitor, or even fund working capital.
With more than 121,000 tax preparation firms in the U.S. generating more than $10 billion in annual revenue, it’s safe to say that the tax prep industry is booming.
If you’re considering acquiring or expanding a tax preparation firm, using a loan from the SBA 7(a) program could be a great solution.
SBA 7(a) Loans for Tax Prep Companies: The Basics
While in-person tax prep services are facing a lot of competition from online firms, the industry continues to grow each year. Fortunately for tax preparation business owners, SBA 7(a) loans are a great way for these companies to get the working capital, owner-occupied commercial real estate, and equipment financing they need to beat out the competition.
How Tax Prep Firms Can Use SBA 7(a) Loans
Partner Buyouts
Buying your partner’s stake in your small business can be a great way to improve your income, especially if your partner wants to retire or move into a different industry.
Working Capital
Tax prep firms can often feel a big crunch during tax season— and they often have to hire extra workers and pay current workers overtime just to keep up with the increased volume of business.
Refinancing Debt
If your tax prep company has business debt that’s currently being offered to it on unreasonable terms, an SBA 7(a) loan can be an excellent way to refinance it.
Purchasing a Tax Prep Company
If you’d like to acquire an existing tax prep company or buy out a competitor, you can also do so with an SBA 7(a) loan.
Case Study: Buying a Tax Prep Firm
Toby, an experienced tax professional based in Worcester, Massachusetts, had a passion for helping individuals and small businesses navigate the complexities of the tax system. He decided it was time to take his expertise to the next level by acquiring an established tax preparation firm in the area.
Toby identified a well-regarded tax preparation firm for sale and realized that he would need additional funding to complete the purchase. After researching various financing options, he concluded that an SBA 7(a) loan would be the ideal solution for his needs.
Toby applied for an SBA 7(a) loan, requesting a loan amount of $300,000 to cover the cost of acquiring the tax preparation firm. After a smooth application process, Toby was approved for the loan and used the funds to complete the purchase.
With the SBA 7(a) loan, Toby was able to successfully acquire the tax preparation firm and continue its legacy of providing top-notch tax services to the community. Under his leadership, the firm expanded its client base and offered additional services, further solidifying its reputation as a trusted partner for individuals and small businesses in Worcester.
This is a fictional case study provided for illustrative purposes.
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Related Questions
What are the eligibility requirements for SBA 7(a) loans for tax preparation firms?
To be eligible for an SBA 7(a) loan for a tax preparation firm, you must meet the following criteria:
- You must be a for-profit business.
- You must be operating legally in the United States.
- You must have a good credit history.
- You must have sufficient collateral to secure the loan.
- You must have a sound business plan.
For more information, please visit https://www.sba7a.loans/sba-7a-loans-small-business-blog/loans-for-tax-preparation-firms and https://sba504.loans/sba-504-blog/sba-504-loans-for-tax-preparation-firms.
What are the advantages of SBA 7(a) loans for tax preparation firms?
SBA 7(a) loans offer tax preparation firms a variety of advantages, including:
- Partner buyouts: Buying your partner’s stake in your small business can be a great way to improve your income, especially if your partner wants to retire or move into a different industry.
- Working capital: Tax prep firms can often feel a big crunch during tax season— and they often have to hire extra workers and pay current workers overtime just to keep up with the increased volume of business.
- Refinancing debt: If your tax prep company has business debt that’s currently being offered to it on unreasonable terms, an SBA 7(a) loan can be an excellent way to refinance it.
- Purchasing a tax prep company: If you’d like to acquire an existing tax prep company or buy out a competitor, you can also do so with an SBA 7(a) loan.
In addition, SBA 7(a) loans can also be used to finance owner-occupied commercial real estate and equipment financing.
What are the disadvantages of SBA 7(a) loans for tax preparation firms?
SBA 7(a) loan disadvantages for tax preparation firms include:
- Lengthy approval times (for standard SBA 7(a) loans)
- Lots of documentation
- Collateral is often required
- Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
- High credit scores are typically required (typically 680+)
- May be restrictions on supplemental/additional financing
What documents are required to apply for an SBA 7(a) loan for a tax preparation firm?
To apply for an SBA 7(a) loan for a tax preparation firm, you will need to provide the following documents:
- SBA Form 1919 (borrower information form)
- SBA Form 912 (statement of personal history)
- SBA Form 413 (personal financial statement)
- Financial statements, including a balance sheet, profit and loss, and income projection.
In addition, you will need to provide the following:
- Agreement to purchase the business
- Letter of intent to buy the business
- Business tax returns for the past three years
- Any outstanding business debt
- Long-term business contracts
- Documentation of business assets
- Business lease agreement
- Incorporation documents and/or business license
- Business plan.
The SBA will usually order an independent business appraisal to give lenders an idea of what the true value of the business is. To complete your application package, you’ll be required to submit SBA-specific forms and documents.
The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.
What is the maximum loan amount available for an SBA 7(a) loan for a tax preparation firm?
The maximum loan amount available for an SBA 7(a) loan for a tax preparation firm is $5 million. This loan can be used for partner buyouts, working capital, refinancing debt, and purchasing a tax prep company.
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