Do I have to invest all my cash to buy a business?

No, no, a thousand times no! That’s one of the reasons SBA loans were created. If they weren’t available then very few of us could afford to buy a business.

But it is true that to qualify for an SBA loan you can’t have too much cash or liquid financial “stuff” available to you – what the SBA refers to as Liquid Assets.

If you have enough liquid personal assets available that you can pay all cash for a business then you don’t need a loan, and you aren’t eligible for an SBA loan.

The SBA’s definition of liquid assets includes certificates of deposit, marketable securities and bonds, and the cash surrender value of life insurance. You should be prepared to invest enough of these assets in the business or real estate to satisfy the lender’s requirements.

However the SBA does not consider liquid assets to include closely held (non-marketable) stocks and bonds, IRA accounts, other retirement accounts, and equity in real estate as liquid assets. So you don’t have to use these assets toward the purchase of a business or real estate.