SBA Financing in Pennsylvania: What to Know Before You Buy, Build or Expand

What stays the same, and what does not

If you are in Pittsburgh, Harrisburg, the Lehigh Valley, Erie, Scranton or Philadelphia, the SBA side of your deal is identical: the same 7(a) and 504 programs, the same cash-flow tests, the same document list. Pennsylvania changes the wrapper: who has to approve the sale, what the closing costs, what the property is allowed to be used for, and what extra help you can line up.

We are not lawyers or accountants. Treat what follows as a checklist of questions for yours.

If you are buying a business in Pennsylvania

Tax clearance on the sale

When a business changes hands, Pennsylvania has a bulk-sale clearance process through the Department of Revenue, to protect the buyer from the seller’s unpaid state taxes. Skipping or botching it can leave the buyer exposed. Ask the deal attorney early, because it can affect timing, and lenders often want evidence that it is handled.

Licenses that do not simply transfer

• Liquor licenses. If the business serves alcohol, Pennsylvania liquor licenses are limited in number, can be bought and sold, and require state approval for a transfer. They can be a large part of the price and are often treated separately by lenders. Build time and a contingency for approval into the contract. More in buying a restaurant with an SBA loan.
• Professional and trade licenses (health practices, contractors, and others) often attach to a person or an entity and may need to be reissued in the buyer’s name.
• Municipal permits and business registrations vary by municipality.

The lease

Many Pennsylvania small businesses rent, often from a local landlord with their own view on assignments. The remaining term, renewal options and the landlord’s consent to the sale can make or break the deal, and a lender will want them settled.

Taxes in the cash-flow model

State and local taxes affect what the business keeps. Pennsylvania’s corporate net income tax rate is scheduled to step down each year through 2031, and local taxes vary by municipality and, in Philadelphia, include city-specific business taxes (see SBA financing in Philadelphia). Use real figures from your accountant, not a guess, when you test coverage in the calculator.

If you are buying your building in Pennsylvania

• Realty transfer tax. A purchase typically carries a state transfer tax plus a local one, usually split between the municipality and the school district, and some places charge more. It is a real cash-to-close item.
• Zoning is local. Pennsylvania has a great many municipalities, and each sets its own zoning and permitting. Confirm that the use you need is permitted before you commit. See the suburban counties guide for how this plays out.
• Property taxes vary by county, municipality and school district, so two similar buildings can cost very different amounts to own. Put the actual bill in your numbers.
• Older buildings are common. Expect closer attention to condition, systems and environmental history. More in buying your building.

State programs that can sit alongside an SBA loan

Pennsylvania’s economic development agencies offer financing and incentive programs, and some regions have tax-advantaged zones, that can sometimes be layered with bank or SBA financing. Whether any fits depends on your project, your location and what is funded this year. A local small business development center, or an economic development contact for your county, is the quickest way to learn what is currently available. Ask before you close, since some programs cannot be added afterward.

Where to start

1. Call your regional small business development center. Free advising on plans and numbers, across the state.
2. Get a clean read on the structure. Run your numbers and see equity injection and seller notes.
3. Line up your advisors early: an accountant and a deal attorney who work with Pennsylvania small business sales.
4. Then talk to lenders, with a package that already answers their first questions.

Pennsylvania regions

Local guides give the detail that changes from place to place. We have written two so far, and will add more as they are ready:

• Philadelphia: older and mixed-use buildings, city taxes and transfer costs.
• Bucks, Chester, Delaware and Montgomery counties: municipal zoning, property types and who serves the area.

For numbers rather than checklists, see SBA loan data for Pennsylvania: how many 7(a) and 504 loans were approved statewide and in each county, how large they were, and which lenders and CDCs made them.

If you are elsewhere in the state, the checklist above still applies. Tell us what you are working on and we will point you to the right local resources. We would rather say “this is a job for your local development center” than guess.