Learn How To Use SBA Loans To Help Sell Your Business.
Your government, through SBA loans and other programs is dedicated to helping small business. And most countries have some similar program. Guaranteed loans are just one product line sponsored by the Small Business Administration in the US, as part of their program. If your business is located outside of the US, your government will likely operate a similar scheme, but under a different name.
To get down to the detail on loans, and other SBA programs, you need to get information directly from the SBA. The other place to get information about their business loans program is from a participating lender. There are many throughout the country, and likely one or more near you. That's right, participating lenders actually make the loans. The SBA does not act as a direct lender.
The role of the SBA in the SBA loans program is that of a guarantor. The SBA guarantees a significant portion of each loan. So in the event of a default, the actual lender is at risk for a modest portion of the overall loss. However, there is a caveat, and it is that the SBA sets out loan guidelines. The net result of this arrangement is that the SBA can significantly increase the numbers of loans that it can make, without increasing its staff level.
Lenders can also make more loans, and increase their loan portfolio concentration in the small business sector, without a proportional increase in risk. Because the SBA has accepted the majority of the risk. So your business has a much greater chance of qualifying for an SBA loan, than it would for an ordinary commercial loan.
You need to take action. Learn as much as you can about SBA loans. Initiate a relationship with a lender from a lending institution participating in SBA loans. Remember how important personal relationships can be. Buy him lunch. Everybody likes to eat. Find out what he is looking for in a prospective client. After you understand his lending policy, invite him to visit your business if appropriate.
Keep you goal in mind. If you haven't figured out your goal yet, this should help. You are reading this because you want to prepare your business for sale. You want to help prospective buyers by saving them the trouble of shopping around for financing. Or at least you want to provide them with a standard to measure other offers against. At a practical level, you need to determine the loan amount your business will qualify for.
If you examine online listings of businesses for sale, you will encounter situations where the business has been pre-qualified for SBA financing. Someone seeking to buy a business, will be attracted to such businesses if they expect to need financing.
Prospective buyers will be attracted to these businesses for two reasons. The fact that the business has been pre-qualified for an SBA loan provides a sort of endorsement. It means that a lender has evaluated the business, and is prepared to lend. The fact that the owner has gone to the trouble of working with a lender to secure a loan commitment evidences a serious seller, and one willing to help a buyer with the process.
Isn't that the reaction you would like from prospective buyers? Don't you want them to have a positive initial reaction to your business, and a wish to consider it seriously as a prospective investment? Don't you want to differentiate your business from all of the other buying possibilities available to any buyer.
Knowing the amount available this way will serve another purpose. It will give you an indication of the gap between what you want for the business, and the loan size that it will support. Under normal circumstances that gap will represent the amount of cash that the prospective buyer will need. Or at least the amount of money he will need to access without encumbering the business. So any additional debt will be unsecured, or at least subordinated to the SBA loan.
If the gap is too large you may need to consider a couple of things. One is your price. Is it realistic, given the size of the loan that it will support? At least as evidenced by the response of one lender. The other thing to consider is the eligibility of prospective buyers. Some may have the necessary cash, without bringing in other investors. Some may not, and may need other investors to finance the acquisition.
If they need other investors, you may wish to assess their likelihood of attracting the needed investment. If they have limited personal resources, and a lackluster business background, you may conclude that they are unlikely to attract investment. Therefore, you may elect to terminate discussions with them, so you don't waste time.
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