Homebuyers are familiar with the mantra—location, location, location. Well, for a business owner looking to sell their business, there’s an equally important phrase to remember—timing, timing, timing.
As a business owner, you have likely spent hours, days, months or even longer agonizing over whether to sell your business. While in a perfect world the hard part would be over, the reality is making the decision to sell is simply the first step in a complicated process.
I Want To Sell But Have A PPP Loan If your business has a PPP loan and you are selling all or part of the business, you may need approval from the SBA or the bank that handled your loan. You may also need to put the amount of any unforgiven portion into escrow at close.
is a broker worth the expense? Hiring a business broker may seem like an unnecessary expense to a business owner who wants to see the highest return when selling their business. But according to research from industry associations the IBBA and The Exit Planning Institute, only a small fraction (10%) of businesses for sale actually sell. Because the business broker's sole responsibility is to sell businesses, and they are doing it every day, they can help increase your chances of a more timely and successful sale for the highest price to qualified buyers.
THE LENDING ENVIRONMENT HAS CHANGED Like most things, the lending environment has changed recently due to COVID-19, and it is taking buyers and sellers by surprise. Underwriting timelines are being impacted and loans are taking longer to process. Banks are now less likely to flex their requirements to help people qualify for a loan. Why is this happening? There are several reasons. 1. Earning and revenues are coming down and banks are weary. 2. Few lenders process loans under $150,000 and those few lenders are now getting inundated with volume. 3. Because the same people that processed PPP loans are also processing business loans, this is impacting banks' ability to assess and close on new 7A loans. 4. Banks now have a lot of capital tied up in PPP loans. 5. Banks are now doing more due diligence and requiring more documentation, so underwriting is taking longer than in the pre-COVID environment. 6. Staff are being impacted by COVID and distancing guidelines so there are fewer people on location to work with underwriters and get loans processed. 7. We now have less than 40 business days before the September 27th deadline to take advantage of the SBA principal and interest payment benefit so loans not currently in process will likely not meet that deadline. 8. Banks want collateral in the form of equity in real estate. 9. Banks are looking for more post-closing liquidity. 10. Banks are looking for industry experience. 11. Banks are looking MORE at the 5 C's: Collateral, Credit, Capacity, Character, and Cash. 12. The strength of a buyer from a financial perspective is really important right now.
When contemplating your retirement and the sale of your business, there are a myriad of questions to consider, that most business owners haven’t had to deal with before. The unknowns of the sale process itself, the business valuation, tax planning, legal documents, etc. can be daunting. The list of questions can be pretty intimidating. With the shear volume of new things to consider, often some fundamental questions never get asked that are pretty important. It is less stressful to consider these questions early in the process rather than while you’re reading through your first offer. Also, planning for these unanswered questions at the front end increases the chances of a successful sale. Examples of some of these questions are: