What PE Buyers and SBA Buyers Actually Want When Real Estate Is in the Deal

One of the most consequential decisions in structuring a business sale with real estate is matching the structure to your buyer type. PE-backed buyers and individual SBA buyers have fundamentally different preferences when commercial real estate is part of the deal, and those preferences should shape how you package and position the transaction before you go to market.

What PE Buyers Want

Private equity buyers typically do not want the real estate. They are building operating companies, not real estate portfolios. Real estate on the balance sheet creates valuation complexity, complicates future recapitalizations, and adds asset management responsibilities outside their core competency.

PE buyers will almost always prefer one of two outcomes: either they buy the business without the real estate and you retain or sell the property separately, or they buy the business and the real estate is immediately sold to a real estate investor with a long-term leaseback in place. If you are selling to a PE buyer, plan around separating the real estate from the business. Structure a leaseback before you go to market so the business can be presented on a standalone basis.

What SBA Buyers Want

Individual buyers using SBA financing often prefer the real estate to be included in the deal. Including real estate enables a 25-year amortization on the property component, which dramatically reduces monthly debt service and improves cash flow from day one. Including real estate also builds equity for the SBA buyer, since every monthly payment on a 25-year amortizing mortgage builds ownership in an asset that should appreciate over time.

Matching Structure to Buyer Target

The most common mistake sellers make is setting their real estate structure before they know who their most likely buyers are. A business worth $8M in enterprise value is going to attract both PE buyers (who do not want the real estate) and individual SBA buyers (who do want it). If you have already committed to one structure, you may be inadvertently disadvantaging one category of buyer.

The cleanest approach is to go to market with flexibility built in. Present the business with a real estate advisory note that clearly explains both the property value and the available structures. Icon’s process builds this flexibility into the marketing package from the start. We do not let real estate structure become a deal-killer when there are multiple ways to structure a transaction that serves both parties.

Related Reading

• Selling a Business That Owns Its Building: Your Three Options
• SBA 7(a) vs. SBA 504: Which Loan Wins for Business Acquisition
• Icon Commercial: Commercial Real Estate Advisory for Business Owners