Stop Using SBA Brokers for $5M - $10M Financing Needs

Why Broker Overlap Happens

Let's start with some simple math.

There are only about 15-20 SBA lenders nationwide who will do pari passu deals. These are deals that require two SBA lenders to share exposure when the loan amount exceeds the $5M cap for a single lender.

That's it. Fifteen to twenty lenders for the entire country.

Most SBA brokers work from essentially the same list. They've built relationships with these same institutions over the years. So when you hire two SBA brokers, you're not doubling your lender coverage. You're just paying two people to make the same phone calls.

Here's what this looks like from the lender's perspective:

They get your deal from Broker A on Monday. Then Broker B sends them the same deal on Wednesday. Maybe a third broker calls on Friday.

Immediate red flag.

The lender starts wondering why this deal is getting shopped so aggressively. Is there something wrong with it? Is the buyer desperate? Are they going to be difficult to work with?

Some lenders will decline simply because of the poor optics. Your deal gets "burned" before you ever had a real shot at it.

The Uncomfortable Reality About SBA Brokers

Here's something that most buyers in the $5M+ range don't realize until they're deep into the process:

Most SBA brokers only know SBA lending.

Their entire network, their entire expertise, their entire value proposition is built around that one government program. For deals under $5M, this works fine. The SBA universe is large enough at that size to create real competition.

But for deals above $5M? You've just limited yourself to maybe 5% of the available lender universe.

There are literally hundreds of conventional lenders, private credit funds, and other capital sources active in the lower middle market. They're financing deals in your size range every single day.

Your SBA broker probably doesn't know any of them.

SBA vs. LMM Financing: Two Different Worlds

SBA lending and lower middle market conventional lending operate on completely different rules. And most brokers only understand one side of the equation.

Here's how they compare:

Leverage

• SBA: Up to 90% financing possible with the right deal and borrower profile

• LMM Conventional: Typically 60-80% leverage, which means more equity required from you

Personal Guarantees

• SBA: Full personal guarantee required on every deal, no exceptions

• LMM Conventional: Often limited guarantees or even no PG above certain deal sizes

Underwriting Focus

• SBA: Heavy emphasis on borrower background, personal credit score, post-closing liquidity

• LMM Conventional: More weight on business fundamentals, cash flow coverage ratios, collateral quality, management capability

Deal Structure

• SBA: Standardized structure dictated by government rules and SOP requirements

• LMM Conventional: Flexible structuring negotiated directly with the lender

Timeline

• SBA: 45-75 days typical with an experienced PLP lender

• LMM Conventional: Varies widely based on deal complexity and lender appetite

Why does this matter for your deal?

A broker who only knows SBA won't understand how to position your deal for conventional lenders. They'll use the wrong language. They'll emphasize the wrong metrics. They'll miss opportunities or misprice the risk entirely.

You need someone who speaks both languages fluently.

The Hybrid Approach for $5M-$10M Deals

Here's what smart buyers in this range actually do:

They run parallel processes.

One track targets SBA pari passu lenders. The other track goes after conventional LMM lenders. Both run simultaneously.

This creates real competition and gives you actual leverage in negotiations. More importantly, it gives you optionality based on what terms come back.

Why this works:

SBA pari passu offers lower equity requirements and government-backed stability, but you're working with a limited lender pool and more structural constraints.

Conventional LMM opens up hundreds of potential lenders with more flexibility on structure, but you may need to bring more equity to the table.

The best outcome? Lenders competing against each other across both tracks. That's when you get the best terms.

Quick example from a recent deal:

We had a client pursuing a $7.2M service business acquisition. Ran both tracks simultaneously.

The SBA pari passu option came back requiring 10% equity with a full personal guarantee. Conventional option required 15% equity but offered a limited guarantee that burned off after two years.

The client chose conventional. For him, the PG flexibility was worth the extra 5% equity. But without both options on the table, he never would have known what he was leaving behind.

What to Look for in a Financing Partner

If you're working on a deal in the $5M-$10M range, here are the questions you should be asking any broker or advisor:

1. How many SBA lenders do you work with regularly?

2. How many non-SBA conventional lenders?

3. Have you personally closed deals on both sides in the last 12 months?

4. Can you walk me through the key underwriting differences between SBA and conventional for my deal size?

Red flags to watch for:

• They only talk about SBA programs and can't articulate conventional alternatives

• They can't name specific conventional lenders they've recently closed deals with

• They don't ask about your equity flexibility or personal guarantee preferences upfront

• They push you toward one solution before understanding your complete financial picture

The Bottom Line

For deals above $5M, the broker overlap problem is real. But it's actually just a symptom of a bigger issue.

The real problem is using specialists in a situation that calls for someone who can operate across both worlds.

At CapFlow, we work with over 100 SBA lenders and 400+ conventional and LMM lenders. Our team has closed many deals on both sides and understands exactly how to position your specific situation for maximum competition.

We run truly competitive processes across both universes so you get real optionality among hundreds of lenders, not just the same 10 lenders called twice.

If you're working on a deal in the $5M-$10M range and want to make sure you're not leaving options on the table, reach out. Happy to take a look and give you an honest assessment of your best path forward.

CapFlow helps independent sponsors, self-funded searchers, and business buyers navigate acquisition financing. We work with 500+ lenders across SBA and conventional markets at no cost to borrowers.

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