In my experience working with the "right banks and financial institutions" repayment ability sometimes overrules collateral pledged by someone needing financing for a business purchase or a down payment.
Arranging to get needed financing for business purchase opportunities with limited collateral to pledge is possible by seeking the loan from an institution in the SBA lender network. While a number of people who've given up the role of company employee - whether or not by choice - want to purchase their own business to insure their future, a major obstacle to this plan is to come up with the necessary cash.
The Right Lenders - SBA Loan Program May Be Solution
Banks and other institutions offering SBA-backed loans, such as the SBA 7(a) loan program, can provide an solution for the would-be business owner who finds himself in this difficult position: A terrific business opportunity has been discovered, but the business buyer doesn't have the collateral usually required to get a business acquisition loan. Yes, he may have some cash remaining after meeting the down payment agreed on, but the available funds will be required to satisfy the business' operating capital needs. Borrowed cash may be needed to complete the deal to buy the business.
The benefit of working with an SBA-backed lender is that the loan officer will follow the Federal agency’s guidelines, which often place emphasis on cash flow of the business when there are not enough assets to fully secure the loan. Conventional lenders, by contrast, are less oriented to factoring in seller discretionary earnings generated by the business, when reviewing a loan application.
Analyzing Cash Available To Pay Off Financing For Business Purchase
The loan or financing underwriter may be willing to excuse the borrower's inability to put up enough collateral to fully secure the loan amount if it's obvious the business can generate the funds needed to repay the obligation. But getting approval of a request for financing for business purchase objectives may be particularly difficult if the borrower is unable to persuade an SBA-backed lender that the company generates enough cash to support the loan payments. Confusion about how to calculate a company’s cash flow, and determine whether it will enable the new owner to meet the principal and interest installments, may cause a buyer to lose a deal even if there will be ample funds remaining for loan service, after all cost of sales and overhead expenses have been deducted from gross revenues.
One difference in the way a borrower and a lender calculate revenues available for repayment often hinges on how each evaluates add-backs. Non-recurring expenses also can confuse the issue, with the buyer showing where more earnings can be anticipated than are shown in the company's financials.
The aid of a skilled and professional specialty loan and financing advisor that specializes only in business purchase financing (and has the long time reliable contacts) often can resolve the disagreements when a buyer is having trouble getting needed financing for business purchases.
About The Author: For over 25 years Peter Siegel, MBA has provided niche business purchase financial advisory and loan brokerage services with SBA Loans, Non-SBA Loans, Retirement Plan Conversions, Hard Money, Bridge Financing, Note Restructures, etc. He assists with financing for: Business Purchases, Business With Real Estate Purchases, Franchise Resale Purchases, New Franchise Purchases, Pay Off Existing Seller Notes, Partner Buyouts, Employee Buyouts. Peter Siegel, MBA can be reached direct toll free at 866-270-6278 regarding getting professionally pre-qualified, advisory & loan placement services.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Brad Steinberg, Broker - Laundromat Specialists
Laundry specialists - founded in 1968 by three laundry professionals, PWS is a family-owned corporation. Through the years it has grown to become the largest vended laundry equipment distributor in the United States. Call Brad Steinberg at 323-721-8832 to sell or buy a coin or card laundromat.
|Helen Yoo: Escrow & Bulk Sale Services - Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Related Articles, Events, Blog Posts, Discussions, Videos, Interviews|
|If You Plan To Offer Seller Financing: 3 Things Owner Sellers Need to Know
When selling your business, offering seller financing is a great way to help your business standout from others on the market and it is also a good strategy to consider that can help you close a sale. Peter Siegel, MBA (BizBen ProSel Program & Financing Expert) explains. Reach him at 866-270-6278.
|5 Myths About Selling A California Business - Top Tips For Sellers & Brokers
Peter Siegel, MBA at 866-270-6278 - BizBen Director discusses myths associated with the process of selling a business and some of them can actually cause deals to fall through. Don't let your sale be comprised, be aware of these common misconceptions related to the process of selling a business.
|Uncover Hidden Problems In Due Diligence When You Buy A Small Business
Most everyone who's decided to buy a small business in California knows the importance of due diligence. That involves close examination of a business prior to removing contingencies. But not everyone knows how to uncover problems that are not obvious. Here are five of the most common hidden issues.
|BizBen Index: Weekly Results - 174 California Businesses Sold 12/26 - 12/30
For the week of 12/26 thru 12/30, 174 CA businesses were sold by business owners, business brokers, and agents. In 2016 16,858 CA businesses have been sold. Last year (2015) 15,660 businesses sold in CA.
|Thinking Of Selling My Business: What Factors Create Value And Drive Price?
There are a lot of misconceptions about what enhances the value of a business. The following factors in this Discussion Post on BizBen are aspects of a business that really drives its value and pricing. Business owners thinking of selling should check these out these factors before selling.
|Tips When Using Escrow Bulk Sale Services When Buying Or Selling A Business
The final part of the business for sale transaction is the escrow and bulk sale process by Peter Siegel, MBA (Business Purchase Financing Expert, ProBuy & ProSell Program Advisor) answers questions and describes the escrow and bulk sale process. Peter can be reached direct at 866-270-6278.
|Should I Buy A Business That is Losing Money? Feedback From Top Advisors
Are businesses worth taking a look at when they are losing money? Multiple Advisors & Business Brokers weigh in on this topic and say yes! (but be careful) on a BizBen Discussion. Some great feedback on this topic will make potential business buyers (and money losing sellers) want to read this info!
|4 Reasons Why Business Brokers Do Not Cooperate With Other Brokers & Agents
Despite challenges in the business for sale marketplace, some of the business brokers who make a living by facilitating a deal between buyer and seller are known to stand in the way of a completed transaction because of some outdated ideas. Too bad they put greed ahead of the needs of their clients.
|See All News, Tips And Events|