Discovering How to Leverage SBA Lending Options
For most entrepreneurs, finding the money to launch their first business stands as a tremendous challenge. The good news is that getting a loan through the Small Business Association (SBA) is turning out to be a viable option for many business owners.
The SBA doesn’t directly provide loans itself, but instead, works to facilitate lending. SBA assistance can even extend into the realm of micro-lending. It is very important for prospective buyers to realize that since SBA loans are government backed, lenders are typically much more willing to offer a prospective buyer a loan. Impressively, the SBA will cover seventy-five percent of a lender’s loss in the event that a loan ultimately goes into default.
Many entrepreneurs find the issue of collateral to be a challenging one. Once again, the SBA can be of assistance. In some cases, an SBA loan may bypass the need for collateral altogether.
Overall, SBA loans do in fact have a good deal in common with other types of loans. Prospective buyers should have all of their financial documentation ready and well organized. In short, prospective buyers should have all their information organized as they would when dealing with a bank without SBA involvement.
Not every prospective buyer will qualify, so the first step that should be taken is for a would-be business owner to check and verify that they do indeed qualify for a loan. The next step for a prospective buyer is to find a lender and complete all necessary SBA forms.
There are several factors that determine eligibility for an SBA loan. Here are the two top factors that are important for qualifying for a loan
- The business must be based in the United States, the business must be a for-profit venture.
- Prospective buyers should expect that their application will take two to three months to process once it has been submitted.
All too often, people assume that they simply won’t qualify for an SBA loan. The statistical data tells a different story. Every year, thousands of people are approved for SBA loans. It’s important to keep in mind that these loans are not just for those looking to buy a business. The SBA also helps existing businesses that are looking to expand.
For the end of 2023, the SBA Administrator Isabel Casillas Guzman announced that this year, the SBA delivered $50 billion and this included capital, disaster relief and small business support. Guzman stated, “The Biden-Harris Administration remains committed to simplifying and addressing persistent inequities in accessing capital to ensure all small business owners can get the funding needed to grow and create jobs for our economy. In Fiscal Year 2023, the SBA transformed its lending and investment programs and expanded its capital partners to deliver nearly $50 billion in startup, growth, and recovery capital, as well as surety bonds, including more small business lending to people of color, women, and veterans.” [1]
Business brokers and M&A advisors are experts in working with the SBA. Entrepreneurs looking to buy a business can benefit enormously from their years of SBA experience. Working with a business broker or M&A advisor can help you streamline the SBA process and dramatically increase your chances of success.
[1] https://finance.yahoo.com/news/sba-announces-biden-harris-administration-154000629.html
Copyright: Business Brokerage Press, Inc.
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Key Steps for All First Time Buyers
Are you a first-time business buyer? If so, it is critical that you work with a business broker or M&A advisor. If you’ve never purchased a business before, you simply can’t anticipate all that is involved in buying a business.
Buying a business is vastly different than buying a home, which is typically the largest purchase that most first-time business buyers have made. Sometimes buyers assume that since they have made large investments before, they will have a leg up in the business buying process. However, they typically quickly find out that they still need a great deal of assistance to navigate the complexities of the business buying process.
Business brokerage professionals know the process, the lay of the land, and the players involved. Additionally, business brokers and M&A advisors know where the traps and pitfalls are located. When it comes time to buy a business, all prospective business buyers can benefit from a guide.
Let’s take a closer look at some of the steps that are involved in purchasing a business.
Sign a Confidentiality Agreement
Prospective business buyers should always be ready to sign a confidentiality agreement. It is important to put yourself in the shoes of the seller. They have invested a great deal of their lives in their business and allowing someone to peak behind the curtain can be a stressful prospect. Signing a confidentiality agreement is an initial sign of good faith.
Investigate the Business
Next, you’ll want to gather a good deal of information about the business. Once more, working with a business broker or M&A advisor is a prudent move as business brokers understand what kind of information should be acquired. They have an understanding of how to uncover important information that might otherwise go unseen.
Armed with as much relevant information as possible and an experienced brokerage professional, you’ll want to carefully evaluate the business in question. With the right information and experienced professionals at your side, you can be sure that you are making a wise investment.
Make Your Decision
The next step is to either decide to make an offer or pass on the business. You and your business brokerage professional will carefully evaluate a range of information including financial statements and tax returns. When choosing to make an offer, it is important that all key details are clearly laid out in writing, and this includes contingencies.
Finding the right business for you, in part, means determining what kind of business you truly want to own. The good news is that business brokers and M&A advisors are experts in every point examined in this article, and they can even assist prospective business buyers with determining what type of business is a good fit. The sooner you begin charting out a plan, the greater your chances of finding the right business for your unique needs, preferences, and specifications.
Copyright: Business Brokerage Press, Inc.
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How to Achieve High Buyer Success Rates
Both buyers and sellers have a lot of emotion wrapped up in their respective decisions. It’s completely natural to feel that way. Business Brokers and M&A Advisors can assist clients with their concerns and fears by giving them more information about how the sales process works and also discussing common pitfalls to avoid. In this article, we’ll go over some of the various issues impacting buyers. If you are able to anticipate potential issues that could interfere with the deal, you’ll be more likely to be able to overcome those issues.
The Initial Intake Process
Buyers should understand that they will need to sign an NDA and treat the non-disclosure process seriously. Brokers representing a seller will be requiring a good deal of information, including financial details, and often even your resume. So don’t be surprised when you’re asked for this information. It’s all a normal part of the process.
The Lending Process
It’s important to realize ahead of time that the lending process can be slow. It is also very common for lenders to ask for more and more information before the approval goes through. If this happens to you, don’t panic or worry. This too is a standard method of operation.
Working with Lawyers
While lawyers are obviously necessary in the process of buying and selling a business, they can also be a source of anxiety. In their efforts to protect their clients, they also can often kill a deal. Of course, get the facts and logistical information that you need from a lawyer, but always remember that lawyers and other business advisors are not the decision makers. If you’re buying a business, the decision is ultimately yours.
The Non-Binding Offer
A non-binding offer allows both the buyer and seller to walk away from a deal if terms cannot be agreed upon in a set amount of time. A non-binding offer shows the seller that the buyer is interested in acquiring the business, but this form of agreement isn’t legally binding. The benefit of the non-binding offer is that it allows discussions and negotiations to move forward.
The Due Diligence Process
The due diligence process is another aspect that allows the buyer to move forward, while simultaneously having protection. At this point, the buyer will receive confidential and sensitive information about a business, such as the financials, inventory, and legal matters. Buyers will also have the ability to conduct additional research and ask the sellers questions. Like the non-binding offer, the due diligence process also means that you have the right to walk away. It is important to have this step available so that buyers can make the most informed decisions possible.
Business brokers and M&A advisors are essential in order to help buyers find the best fit. We not only save our buyers time and energy, but we also help to ensure that the transaction goes as smoothly as possible.
Copyright: Business Brokerage Press, Inc.
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BizBuySell Insight Report for 2022
BizBuySell has issued their latest insight report, which summarizes market growth and trends from last year. In this report, they have several interesting areas to report including a summary of how lower sales prices and rate hikes impacted the value of businesses in recent months. The report can be found at https://www.bizbuysell.com/insight-report/#reportArchive.
Overall Trends in 2022
Buyers currently appear to have some leverage when it comes to the prices of businesses on the market. When comparing 2022 with 2021, we see a 4.7% increase in closed transactions. Comparing it to the year prior, there is a 19% gain. Obviously, 2020 sales were negatively impacted by COVID.
While sales grew substantially in the first half of 2022, there was a decrease in momentum in the second half of the year due to inflation and interest rate increases.
The number of transactions recorded by BizBuySell.com in 2022 are actually fairly comparable to 2021, with numbers of 9054 and 8647, respectively. While the transactions raised 27% and then 14% in the first and second quarters, transactions then lagged in the second half, dropping by 2% and then 12.7%.
Trends Among Business Owners
BizBuySell’s surveys showed that the majority of owners are concerned about rate hikes and inflation. In fact, 53% say that the rate hikes are having a negative impact on them. They also reported concerns about rising SBA loan rates, as many business owners utilize their lines of credit. In addition to that aspect, there are still supply chain issues that are negatively impacting businesses.
The main takeaways from 2022 seem to be a steady but slow progression in growth. Moving into 2023, interest rate hikes and inflation seem to be on everyone’s mind as a prevailing factor that will have an impact on sales and growth.
It’s Never Too Early to Create an Exit Plan
The report also reveals that according to data acquired by BizBuySell, only 53% of business owners say they have an exit plan. Only 58% of owners reported knowing what their business is worth. If you are a business owner and would like to find out more about what your business is worth, a business broker or M&A advisor can assist you with that information.
Copyright: Business Brokerage Press, Inc.
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Four Questions to Ask Yourself Before Purchasing a Business
Truly understanding a business is much like understanding the condition of a car. It is necessary for a skilled mechanic to “pop the hood” to access the true condition of a car. In much the same way, you and your team of experts need to “pop the hood” of the business in order to understand the business’s long-term health and viability. Here are four things to consider before signing on the dotted line.
Will You Enjoy the Work?
Owning a business, especially if you are planning on being an owner-operator, can be a demanding path. You will likely have to log many hours, especially in the beginning. For this reason, you’ll want to select a business that you will enjoy owning.
Life is too short to own a business that you would not want to be involved in. Importantly, if you do not like the business you own, the odds of facing burnout and losing interest are higher. It goes without saying that these kinds of obstacles can dramatically harm your business. Think long and hard before selecting a business to buy, as it is a decision that you will have to live with for years to come.
Did You Examine the Business Plan?
A second factor to consider is that there is no replacement for a good business plan. When you are considering buying a business, you’ll want to dive in and understand every aspect of the current owner’s business plan. If the business plan has major holes or just doesn’t seem to be adding up, you should move on.
Do You Understand the Financials?
Similar to understanding the particulars of a business’s business plan, it is also critical that you have a very precise and clear view of a business’s financials. You should look over everything from profit and loss statements to tax returns and more. It is a smart idea to consult your accountant and a brokerage professional regarding what financial documents you should review. Before you buy a business is the time to understand every small detail of a business’s financial health, not after.
How is the Business Performing?
A fourth factor to consider when evaluating a business is the business’s overall performance. It is possible for a business to have a good business plan (at least on paper) and strong financials and yet it could still have a less than stellar future. Oftentimes, the true health of a business lies beyond the business plan and the current financials.
You’ll need to know about a wide variety of factors including how vulnerable the business is to competition, changes in market forces, the status of key management and employees, the relationship with key suppliers and customers, and any pending litigation. When buying a business, you simply can’t afford to overlook any area.
If you keep an eye on these four key areas, and work closely with experienced professionals like business brokers or M&A advisors, your odds of finding the right business for you will skyrocket. Owning a business that you love will greatly increase your chances of success, so don’t underestimate the emotional factor in the equation.
Copyright: Business Brokerage Press, Inc.
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