Share This Info:  

Tips And Ideas For Financing A California Business Purchase


Financing A California Business Purchase

Anyone interested in financing a business purchase in the past year or so knows how difficult it can be to accomplish that objective. The problems that hit the banking industry with the mortgage meltdown starting in 2007 have made most loan officers very cautious about lending to entrepreneurs wanting to buy small or mid-sized businesses for sale in California. And the impact has been experienced in a slower rate of business transfers over the past couple of years.

But resourceful California entrepreneurs are not waiting for a return to the old days when lenders were more eager to cooperate, and there was plenty of home equity to use as additional collateral. They are pursuing other avenues to get the cash needed to conclude their transactions.

Two of the most widely used strategies are:

1. Increased use of seller financing. The number of sellers insisting on all-cash deals has declined over the past year or so. Business owners ready to retire or move on to another enterprise are discovering it may take a very long time to find a buyer willing and able to comply with that difficult requirement. And most likely, the buyer able to cash out the seller will insist on a substantial price discount.

Along with the change of heart among sellers about helping to finance, now that bank loans aren't as easy to come by, is an increase in the amounts that finance-willing sellers are agreeing to lend, as a percentage of the total price.  The amount of seller loans, which averaged one-fifth to one-third of the total price up until about two years ago, is now in the 25% to 40% range. Sellers may not like the idea of getting less money at close of escrow than did the entrepreneurs who sold before the financial crisis. But increasing their assistance to a buyer who is financing a business purchase, may mean the difference between selling and not selling a business.

2. Smarter loan applications. And the difference for the buyer, between making and not making a purchase, can depend on how well a loan application is prepared. The SBA has been working hard, and getting some Congressional support, to persuade its preferred lenders to offer SBA loan programs to small business owners who want to expand, or entrepreneurs who want to purchase a small business.
   
Even with some purchase money available through these programs, the challenge is getting your application accepted by a lender. Responding to that challenge, and with the aid of smart California loan brokers who specialize in working with the SBA programs, applicants are getting better at submitting applications that get the stamp of approval.

For one thing, buyers know they're much more likely to get purchase money funds when their background matches the industry in which the business is involved. SBA loan backed lenders take their cue from the federal agency, which strongly favors the idea of business buyers doing exactly what they do best, rather than plunging into unfamiliar waters when they buy a business. The applicant with a retail food service background has a better chance of getting funds to buy a restaurant than does the person whose experience involves industrial engineering. And it's common now for a loan applicant to include a business plan, demonstrating to the lender that the borrower has thought about how to operate the enterprise and to make sure it produces enough cash to repay the loan.

Additionally, many buyers are getting in the habit of pre-qualifying for SBA loan programs, even before a suitable business is found. This approach enables the buyer to learn how much they can borrow and to fine-tune the application for a specific business, once it is identified. Pre-qualification also is a smart negotiating strategy for the person who'll need help financing a business purchase. Once given the general green lightŁ by a lender, the buyer usually can expect a fast response when requesting funds for a specific purchase. That means she'll be prepared to proceed with a deal before other potential buyers have made much progress at finding the money--a strong selling point when discussing price and terms with the seller.

While financing a business purchase has become more difficult in the current economic environment, resourceful Californians still are finding ways to access the needed money.

Peter Siegel, MBAAbout the Author:  Since 1994, Peter Siegel, MBA has been assisting business buyers with business purchase financing solutions (SBA loans, Commercial Financing, Retirement Plan Conversions, Hard Money loans, etc) and business purchase financing pre-qualifications. For more information on business acquisition financing and the BizBen ProBuy Program phone Peter Siegel direct at 866-270-6278.


Categories: BizBen Blog Contributor, Business Purchase Financing, How To Buy A Business, Small Business Financing



  Helpful Resources To Assist In Selling And Buying California Businesses
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.

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.

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.

Joe Sandbank, Esq. - Legal Services

I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.

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.

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

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.

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 805-428-2063.


  Related Articles, Events, Blog Posts, Discussions, Videos, Interviews
How To Determine Whether The Buyer For Your Business For Sale Is Sincere

A problem owners encounter when offering a CA business for sale is that not all so-called business buyers are qualified to make the purchase. It's frustrating and costly to waste time showing non-qualified buyers the business. Here are ways to identify time wasters so the focus is on real buyers.

Is There Such A Thing As Paying Too Little When Buying A Small Business?

We all understand the idea of paying too much for a small business. But is there such a thing as not paying enough? That seems like an odd notion, but I'm familiar with situations in which a buyer acquired a small business for a figure substantially under what probably was market value.

Selling Your Business To One Of Your Employees - A Good Idea? Pros And Con

After investing years of time and talent into a company, many small business owners want to feel like they are leaving their business in good hands and for that reason, some sellers opt to sell their business to an employee. Peter Siegel, MBA talks about the pros and cons to taking this route.

Absentee Run Small Businesses - Is That Really A Possibility For Buyers?

Is buying a absentee run small business really a possibility? Peter Siegel (BizBen ProBuy Director) gets asked this question a lot in his consulting sessions with business buyers. Read more about what other Advisors and Intermediaries feel about this topic on this popular BizBen Discussion!

Unreported Income: Should Sellers Disclose Unreported Cash To Buyers?

Should owners who offer a business for sale reveal to prospective buyers any income that is not recorded in the books? This is a controversial topic with arguments both for and against. Most business sales intermediaries believe if you don't pay tax on it, you can't claim it. Some sellers disagree.

How Do I Navigate Through The Negotiation Process When Buying A Business?

Negotiating the terms of a business deal is a delicate process, where one wrong move can cost you the business that you wanted to purchase. Peter Siegel, MBA (BizBen ProBuy Program) discusses the ins and outs of negotiations, and how to work well with the seller to get a deal done.

Find Out Why 80% Of California Business Buyers Never Find And Buy A Business

First the dreaded statistic: 80% of all California business buyers looking to buy a small to mid-sized business in California never end up doing so! Peter Siegel, MBA BizBen Founder And Director at 866-270-6278 covers successful tactics all business buyers of small businesses should utilize.

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.

See All News, Tips And Events


Business Purchase Financing SBA Loans
SF Bay Area Business Broker
Chris Lazurik Business Broker
BizBen Podcasts Live
Facebook
Twitter
Linkedin
Google Plus You Tube
Vlogs and Podcasts


Auto Related
Business Services
Children Related
Communication Related
Computer, Internet Related
Construction Related
Entertainment Related
Financial Services
Health, Beauty Related
Home Improvement Related
Maintenance Related
Manufacturing Related
Media, Publishing Related
Pet Related
Photography/Video Related
Real Estate Services
Restaurant, Food Related
Retail Related
Service Related
Sports Related
Transportation Related
Travel Related
Wholesale Related

Auto Body Shops
Auto Repair Shops
Bakeries
Bars, Sports Bars
Cafe Restaurants
Car Washes
Cleaning Services
Clothing, Apparel Stores
Coffee Shops
Convenience Stores
Deli Restaurants
Discount, Dollar Stores
Dry Cleaners
eCommerce Websites
Fast Food Restaurants
Florists, Flower Shops
Full Service Restaurants
Gas Stations
Gift Shops
Gyms, Fitness Facilities
Home Health Agencies
Hotels/Motels
Ice Cream Shops
Juice, Smoothie Shops
Laundromats
Liquor Stores
Markets, Marts
Nightclubs
Pizza Restaurants
Postal, Shipping Stores
Preschools, Day Care
Print Shops
Salons, Beauty Shops
Sandwich Shops
Smog Test Only Shops
Smoke Shops
Spas, Med Spas
Sushi Restaurants
Tire Shops
Towing Services
Vending Routes
Wireless, Cellular Shops
Yogurt Shops

Alameda
Alpine
Amador
Butte
Calaveras
Colusa
Contra Costa
Del Norte
El Dorado
Fresno
Glenn
Humboldt
Imperial
Inyo
Kern
Kings
Lake
Lassen
Los Angeles
Madera
Marin
Mariposa
Mendocino
Merced
Modoc
Mono
Monterey
Napa
Nevada
Orange
Placer
Plumas
Riverside
Sacramento
San Benito
San Bernardino
San Diego
San Francisco
San Joaquin
San Luis Obis
San Mateo
Santa Barbara
Santa Clara
Santa Cruz
Shasta
Sierra
Siskiyou
Solano
Sonoma
Stanislaus
Sutter
Tehama
Trinity
Tulare
Tuolumne
Ventura
Yolo
Yuba

0 to $99,999
$100,000 to $249,999
$250,000 to $499,999
$500,000 to $999,999
$1 million to $2 million
over $2 million



BizBen - Where California Deals Get Done! 888-212-4747
7172 Regional Street #364 · Dublin, CA. 94568
BizBen · Copyright © 1994 - 2019, All Rights Reserved

               Vlogs and Podcasts  
Join Us On Social Media - Content Updated Daily
Sign Up Today - For Our FREE BizBen Weekly Email Newsletter
Includes The Best Info On Buying, Selling, Valuing, Financing California Businesses:
Articles, Blog Posts, Podcasts, Videos/Vlogs, Discussions, Q&A, Workshops, Webinars,
Resources. Watch For An Email Confirmation After Signing Up Above. Thank you.
Clost Login


Please confirm your registration by clicking the link we've sent to .

If you can't see it, please check your junk mail folder.

If you have any problems registering, or need assistance with your new BizBen User Account please phone BizBen Customer Support at 888-212-4747.



First Name:*
Last Name:*
Email Address:*
Confirm Email:*
Create Password:*
Confirm Password:*
Phone:
(   
 


You Are A:
Individual
 
Intermediary
 

Email Address:
Password:
 
Search BizBen.com

500 New & Refreshed Detailed Postings Daily
Over 2500 Resources Available On BizBen
Since 1994. Where California Deals Get Done!
Tips When Using Escrow Bulk Sale Services When Buying Or Selling A Busin...
Read More News
If You Plan To Offer Seller Financing: 3 Things Owner Sellers Need to Kn...
Read More News