Qualification Criteria:

Does AdvisorLoans provide free loan pre-qualifications?

Yes, this is a free service we provide advisors. We provide phone or zoom (advisor preference) consultation conversations to discuss the best options and structures and determine any issues or red flags that we might see with your loan. If we are confident we can get your loan funded, and you want to utilize our services, then we’ll have you complete an application and upload tax returns, AUM/Revenue report, and additional items based on the consultation. SBA pre-qualification proposals from our lenders takes 1-2 days and conventional pre-qualifications usually takes 2-7 business days.

Can AdvisorLoans help if another lender already rejected my loan?

We are often able to get loans funded that were rejected by other lenders. One reason for this is because we utilize multiple lenders that have a much wider qualifying criteria than others. Another reason is because of our willingness to dig in and develop workarounds, or helping to restructure a solution that can get financing approval.

What is the minimum conventional credit score required?

Conventional lenders generally have a 700 minimum credit score but some can go a little below this under certain circumstances (like a recent divorce).

What is the minimum SBA credit score required?

The SBA does not have a minimum credit score requirement and defers to the SBA lenders standard credit score policy for loans over $350K. SBA lender credit score minimums vary, but typically range from 625 to 680. For loans under $350K the SBA utilizes their own scoring system with their own secret sauce algorithms.

Which credit bureau do lenders primarily use?

Most use the TransUnion credit report.

Is there a minimum amount of AUM required for the borrower?

Many conventional lenders will have an official minimum AUM requirement of $20M to $50M to be considered for even a small loan. The SBA itself does not have a minimum AUM requirement, but many SBA lenders do set a borrower minimum AUM of $20M to $30M. AdvisorLoans does not have a minimum AUM size we will work with for SBA loans, we even help advisors with no AUM get acquisition loans.

Can W-2 advisors without AUM qualify for an acquisition loan?

Yes, we do this frequently.

Is there a minimum and maximum loan amount?

Conventional lenders typically won’t touch a loan under $250K (if that) and may think they are doing you a favor for a loan under $500K. The conventional lenders focused on advisor lending are typically comfortable up to $5M to $7M, but some will start getting queasy when loan amount gets north of this. However, there are conventional lenders that have the ability to go as high as $10-$20 million.

SBA lenders focused on the wealth management industry vary on their minimum loan amounts they'll do, but $250K is common. The maximum SBA 7(a) loan amount(s) that the SBA will guarantee is $5 million.

AdvisorLoans does not have a minimum AUM requirement.

What is DSCR and why is it so critical to my loan approval?

Debt Service Coverage Ratio is determined by dividing your annual EBITDA by your total annual debt service. This ratio is a reflection of available free cash flow after paying all expenses and debt service payments. If deals don't cash flow enough they don't get done, regardless if it is conventional or SBA, or even fully collateralized.

How is DSCR calculated for acquisitions?

The cash flow of the buyer and seller practices are combined and the new loan debt service added in. Most lenders in our space will look at how the combined practices (with the new loan payment) cash flows historically and projected. The lender will also look at the financial health of the buyer’s business historically as well.

What are the minimum DSCR requirements?

Most conventional lenders will have a 1.5 to 1.75 DSCR minimum with some able to go a little lower if they needed to. The SBA mandates a 1.15 DSCR minimum but most SBA lenders will range from 1.25 to 1.75 DSCR. AdvisorLoans can get our SBA lenders to go as low as a 1.15 DSCR. Lenders want to see both the historical period (usually two years) and the projected period (one year) to both meet the DSCR minimum.

How does a bank’s DSCR minimum impact how much money I can qualify for?

With all else equal, if you use a bank with a 1.15 DSCR minimum you can get 17% more money than the bank with a 1.50 DSCR minimum and 52% more money than the bank with a 1.75 DSCR minimum.

If a borrower has $600,000 in EBITDA:

• 1.75 DSCR = $2,573,527 loan approved
• 1.50 DSCR = $3,002,448 loan approved
• 1.15 DSCR = $3,916,237 loan approved

Would all SBA lenders approve the same borrower for the same loan amount?

No. There can be up to a 52% difference in the loan amount two different lenders are willing to approve for the same borrower and deal. (See answer above for example)

Is LTV (Loan To Value) an important thing in loan qualification?

Yes. Most lenders will have a 70% to 80% LTV requirement. For an acquisition, the LTV is calculated as: LTV = Amount of Loan / Combined Practice Value (of buyer and seller).

Can I qualify with a previous bankruptcy?

AdvisorLoans has lenders who we can get loans approved even with a previous BK. This is a case-by-case basis but we have had good success in overcoming this obsticle.

Can FINRA or SEC disclosures keep me from qualifying for a business loan?

Yes. Lenders look at the BrokerCheck report. If there are numerous recent disclosures with sizable amounts, or a serious open disclosure, you are at risk of getting denied. Lenders will typically ignore “Dismissed” disclosures. Even if you have one ding from 10 years ago, be prepared to submit a written explanation. AdvisorLoans assists our clients who are in this situation by helping the lender better understand the story and get comfortable with the circumstances around the disclosure.

At what point would a lender consider me to be over leveraged?

Some conventional lenders will look at how levereged a borrower is and would be after the new loan.

The leverage calculation is determining the dollars of debt to either NOI or EBITDA dollars. The leverage number represents the number of times the funded debt is above NOI or EBITDA. The leverage number varies based on the lender’s preference of items included in their global (business + personal) debt calculation.

To calculate global leverage, take total fixed debt + personal fixed debt / EBITDA + personal income – estimated taxes = global leverage number. The typical maximum leverage number we see lenders being comfortable with is 3 to 4 times.

Do I need life insurance for the loan amount to qualify?

Both conventional and SBA lenders require a collateral assignment of life insurance for the amount of the loan. Generally, for conventional lenders, this is mandatory. We have a conventional lender that will allow for personal collateral to be substituted for life insurance but most lenders won’t do this.

We can typically get around a borrower who is ineligible for life insurance with an SBA loan. In this case, an insurance rejection letter and continuity/succession plan is required.

Is collateral like my home equity required to qualify?

Not exactly. The SBA does not require borrowers to have equity in a house/property to qualify.

The SBA does not have personal property collateral requirements for loans under $500K and defer to the SBA lender’s standard policies. For loans over $500K the SBA does not require lenders to collateralize the loan with personal property if the borrower has less than 25% equity of fair market value. Some SBA lenders have internal policies that will cause them to require the property as collateral even if the loan amount is under $500K.

It is a SBA requirement that for loans over $500K, if you have 25% equity in any personal real estate, including residential and investment property, that it be required as collateral, up to the full loan amount. This means in some cases, multiple properties could have a lien applied to it by the lender.

For SBA loans considered marginal or borderline, the bank may require the property as collateral even if the SBA isn’t mandating it. For example, if a loan is a 1.15 DSCR, 625 credit score, and had a BK 7 years ago, the lender may require to collateralize available property.

When is my credit pulled?

AdvisorLoans lenders do not pull your credit score until the term sheet proposal is executed.