Small Business Sales with Bank or Seller Financing Improve Opportunities For Buyers
Sunbelt Midwest has completed thousands of small business sales. Recent market improvement and transaction volumes continue to grow. Banks and motivated Sellers are financing more small business deals bringing opportunities to buyers.
Milwaukee, WI (PRWEB) October 25, 2012
Sunbelt Midwest works with various business advisers and bankers to coordinate the sale of small businesses. Brokers are increasingly working with banks to obtain term sheets for business loans before taking a business to market. This qualification process is helping buyers find the confidence to invest as well as improve their chances of securing small business financing. In recent years, obtaining bank financing for small business acquisitions could be challenging especially since many businesses experienced a slow down of sales during the recession. A solid, profitable business for sale with a term sheet in place validates investment potential to a buyer. Sunbelt Business Brokers educate buyers on their financing options, deal structures, and terms.
“A business broker's role is to educate Sellers about ways to make their business attractive for sale as well as educate Buyers on the business acquisition process. A Sellers willingness to offer earn outs or a seller-financing note can make or break a transaction. Earn outs are typically based on projections of the business profits and structured over a one to three year term. A seller-financing note often bridges the value gap and the Sellers receive monthly, quarterly, or semi-annual payments from the buyer. Although Sunbelt Business Brokers typically represent the sell-side of business transactions, we can be a valuable partner to a buyer. We have strategic partnerships and ongoing relationships with bankers, attorneys, and business owners that bring buyers valuable insight for successful deal negotiation,” said Ed Krajcir, President of the Milwaukee office of Sunbelt Midwest. “Deals that combine cash, seller-financing, and or bank financing are the deals we are most often seeing go to the closing table in today's market.”
The Small Business Administration (SBA) is a very widely known lending source for small business development. The SBA offers several small business loan programs designed to help aspiring entrepreneurs open, acquire or grow businesses. According to their website Sba.gov, they recommend that before applying for a loan buyers have a clear financial picture of their financing needs. Certain factors come into play for influencing the decision of the lender to approve their request. A business profile and plan, demonstration of experience, collateral and a business pro-forma or financial records is often required. Below are a few key items the SBA and Sunbelt suggest buyers consider before applying for small business financing.
Offering some type of personal guaranty for the sale of a business will show a buyers commitment to the successful future of the business. By showing willingness for personal risk, it demonstrates seriousness to the bank and the Seller.
Buyers ideally should have the ability to bring up to 25% of the accepted purchase price in cash at closing. This shows a desire to invest in the business venture and a confidence in their ability to run the business.
Buyers who do not have as much cash or personal collateral to secure a business loan should tout their industry experience. A long successful history in the industry shows an understanding of the management of the business and its financial challenges. Often this can be the biggest asset to a buyer when going to a bank for lending. It can be particularly beneficial for a buyer to highlight their management experience.
Lenders and Sellers will want to see a well thought out plan for a businesses future success. They want to know a buyer has a good understanding the businesses profits, and operating expenses. A buyer should account for their personal financial needs, determine a salary, and incorporate it into the business plan.
About Sunbelt Midwest
Sunbelt Midwest is an elite division of Sunbelt, the largest organization of business brokers and M & A professionals in the world. With five offices in Minneapolis, Minnesota; Chicago, Illinois; and Milwaukee, Wisconsin, Sunbelt Midwest is a premier brokerage. The business brokers and M & A intermediaries of Sunbelt Midwest, consistently rank in the top performers of Sunbelt International. Sunbelt Midwest is trusted with coordinating all of the national franchisor relationships for Sunbelt. Because of this interaction, Sunbelt Midwest has a unique ability to market businesses throughout Sunbelt internationally. Sunbelt Midwest truly has a GLOBAL reach!
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