SBA Financing for FedEx Routes: Down Payment and Standby Explained
If you’re looking to finance a FedEx Ground route acquisition with an SBA loan, you’re already on the right track toward maximizing leverage. SBA 7(a) loans can cover up to 90% of the purchase price, which makes them one of the most accessible ways to fund a business acquisition. And when you’re working with an SBA lender who specializes in FedEx Ground transactions, like GBank, you may even find some wiggle room to finance a little more.
But there’s one important detail every buyer should understand: how standby rules impact your down payment, especially when Seller Financing is involved.
The Basics of SBA Financing for FedEx Routes
Let’s say you’re purchasing a FedEx route business for $1 million. A standard SBA loan could finance 90% of that, meaning your out-of-pocket down payment would be $100,000.
However, if you structure the deal to include 5% Seller Financing, your cash requirement drops to just 5%—or $50,000. The catch? SBA rules require any Seller Financing included in the deal to be placed on full Standby.
What Does "Standby" Mean?
A Standby agreement means that the seller cannot receive payments on the loan they extended to you for a specific period of time. The rules vary based on how much cash you’re putting down:
If your cash down payment is less than 10%, all third-party notes—including Seller Financing—must be on full Standby for the life of the SBA loan.
If your down payment is 10% or more, Seller Financing only needs to be on full Standby for two years.
In practical terms, this means the seller won’t see any of their financed portion until either two years pass or the SBA loan is completely repaid, depending on the structure of the deal.
Why This Matters
While Seller Financing is a powerful tool to reduce the cash you need to bring to the table, the Standby clause can significantly impact the seller’s willingness to offer it. Sellers might hesitate if they have to wait years to see that money—or if interest accrues without regular payments.
Still, when used strategically, Seller Financing can be a win-win:
Buyers can lower their upfront capital requirements.
Sellers can command a higher overall purchase price.
Understanding how SBA Standby rules work is crucial to structuring a deal that makes sense for both parties.
Ready to Buy a Route? We Can Help.
At Route Consultant, we specialize in helping investors buy and finance FedEx Ground routes. We can connect you with SBA lenders who understand this space, advise you on deal structure, and guide you through every step of the acquisition.
Contact us today to get started.
Want to dig deeper into the financial side of buying routes?
Check out our blog: How to Secure an SBA Loan for Your FedEx Ground Business for more insights into SBA loans, lending partners, and tips for first-time buyers.
