Today's SBA Loan Tip comes from Andy Dobrov at Premier Business Opportunities:
"Everyone in my circles talks about the fact that equity lines have dried up recently and that SBA loans are far more difficult to get than they were just six months ago. In spite of the gloomy anecdotes, I just completed a Quiznos transaction in record time that involved 85% SBA financing. We literally did the deal from start to finish in under 2-months with full SBA financing while everyone around me said it would be completely impossible. When I started the process, I was told by 7 banks that getting SBA financing on this Quiznos was completely out of the question. Some told me incorrectly that the SBA put a hold on all Quiznos financing due to the high default rate. Others told me the SBA was severely tightening their criteria on restaurant loans in general and that banks are only allowed to approve restaurants with unbelievably strong financials. I received lots of inaccurate and misleading information but I kept digging and finally found a bank that enthusiastically did the deal in record time.
The part that is most confusing and even misleading when dealing with different banks is their tendency to present their own rules as though they come directly from the SBA. You see, the SBA is a government agency that effectively provides an insurance policy to the bank on their business loan as long as the bank follows certain guidelines. The bank also has its own rules and approval criteria in addition to the SBA requirements, and it is not always easy to differentiate between the two. People can become discouraged by the entire SBA loan process because they initially get enthusiastic responses from their local bank and then find out the deal cannot be done due to some unforeseen obstacle. This is very common because once the agent begins to collect more information about the business, credit histories, and experience, there are always going to be unforeseen challenges and obstacles. Once an issue is discovered, the big question is whether it is specific to that bank or an actual SBA issue.
Most banks will lead you to believe that all issues are SBA issues because they don't like to admit that their own rules are stricter than their competitors. They would like you to believe that all rules come from the SBA itself when almost half of them are unique to that bank. Figuring out whether the issue is a bank issue or an SBA issue is absolutely critical because it determines whether you have truly hit a roadblock in obtaining SBA financing or whether you simply need to go to a different bank.
For example, all banks like to have the landlord sign an agreement that gives the bank first priority access to the fixtures and equipment in case of a default on the loan.. However, not all landlords are willing to sign an agreement putting the bank first in line to take the equipment. Some landlords think they should be first in line if they are not receiving rent from the tenant. If a landlord does not agree to sign the "Landlord Subordination Agreement", some banks will immediately deny financing while others will agree to proceed without it. If a given bank is not willing to make an exception, they will almost always tell you that it's an SBA requirement and there is no way to do the deal without the landlord's cooperation. However, that requirement is not an absolute SBA requirement at all, and it is up to the bank to decide whether or not they will allow exceptions.
These types of issues come up frequently during an SBA loan, and it critical to have the right consultant help you figure out the difference between a real showstopper and a minor obstacle, because experience will usually make or break your deal."
What have been your recent experience with SBA lenders in getting financing to buy a California business? Submit Your Comments and share what you have experienced lately.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Helen Yoo, New Century Escrow - Escrow Services In 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.
|William F. Ziprick, Attorney: Legal Services For Buyers And Sellers
Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.
|Brad Steinberg, Business Broker: Laundromat Specialist
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
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.
|Elizabeth McGovern: Escrow Services - San Francisco 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.
|Janet Carrera: Escrow & Bulk Sale Service - 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.
|Shalonda Chappel: Escrow & Bulk Sale Services - Southern California
Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.
|Related Articles, Events, Blog Posts, Discussions, Videos, Interviews|
|Find Out Why 80% Of California Business Buyers Never Find And Buy A Business
First the dreaded statistic: 80% of all CA business buyers looking to buy a business in California never end up doing so! Peter Siegel, MBA BizBen.com Founder & ProBuy Director) covers successful tactics & strategies all business buyers of California small to mid-sized businesses should utilize now.
|Why Isn't My Business Selling? 6 Great Questions To Ask Yourself For Answers
It can take months, sometimes longer to sell a small business. Here are 6 questions from Peter Siegel, MBA (Business Purchase Financing Expert, ProSell Program Advisor with BizBen) at 925-785-3118 to ask yourself to help you determine why your small to mid-sized California business isn't selling.
|Buy A Business Or Start From Scratch? 5 Key Differences For Business Buyers
Some buyers believe it's better to start a business from scratch rather than buy an existing enterprise. While this may be good advice in some cases, usually it's not the best strategy. Here are five tips to help a buyer make the right decision from from Peter Siegel, MBA (BizBen Director).
|Selling A Business Without Getting Sued: 5 Tips For Business Sellers/Brokers
How do I sell my business without getting sued, isn't a subject just for discussions with lawyers. A seller can take some precautions to reduce potential legal problems. Peter Siegel, MBA Founder Of BizBen and BizBen's ProSell Program discusses this topic for business owners/sellers and brokers.
|I am Buying A Business: Should I Buy The Property As Well? A Good Decision?
There are advantages and disadvantages to owning commercial property. Here are a few questions to ask when it comes to deciding whether or not to buy the property along with the business. Peter Siegel, MBA with the BizBen ProSell Program reviews this issue with potential sellers and intermediaries.
|Why Deals Fall Out: Unrealistic High Asking Prices Are Usually The Reason
The unfortunate truth is that approximately 50% of all small business sales transactions fall through. While failed transactions can happen for a variety of reasons, Peter Siegel, MBA (BizBen Founder & Lead Advisor) discusses the most common reason deals fall through; unrealistic asking prices.
|Financing A Business Purchase With Limited Or No Real Estate Collateral
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. Peter Siegel, MBA (Business Purchase Financing Expert) at 925-785-3118 shares his experience.
|What Is The Typical Business Broker Fee For Sellers And Buyers? Who Pays It?
Was just asked the question from a business owner what the "typical commission" amount is for a broker or agent and if upfront fees are common? Thought this might be a great Discussion topic on BizBen for both business owner/sellers and potentially for business buyers (buyer representation).