The process of buying or selling a business can be complicated and sometimes stressful. On average, one in four American businesses will change hands each year. Many of them are sold by owners themselves who are inexperienced with the intricacies of such a significant commercial transaction. Because of that lack of awareness, they generally sell their businesses for less than what they are worth and face a host of obstacles, including transactional problems, financing disruptions and other issues.
Before considering the sale of a business, the owner should know the value of his or her enterprise.
Business valuations are critical, especially when they reside in up and coming cities, such as those in the Southwest Florida area. Southwest Florida is continuing its growth trend, recently having three cities in Lee County named to the fastest growing cities list compiled by WalletHub.com. And in a recent Florida population annual report, Fort Myers population grew significantly in 2017 by 3.6%, leading the state in growth.
You don’t have to go through the complicated process alone. An experienced, licensed brokerage firm like CIBB can help navigate the challenging financial landscape of the selling process, as well as provide a valuation of your business to ensure you are getting fair market value taking into consideration the ever-changing Southwest Florida business landscape.
There are many reasons for small business owners to be optimistic these days when it comes to business sales and acquisitions. The Small Business Administration (SBA) recently made several changes to its loan guaranty programs that could increase small business lending.
In an effort to better streamline the process and make SBA loan programs more appealing, the SBA recently issued modifications to its standard operating procedure (SOP 50 10 5 (J)). The changes took effect on January1, 2018. For sellers, two notable changes provide an advantage and ease the once arduous requirements.
Lower equity requirements
The first involves lower equity requirements up front. The past rule for acquisition loans stated that, for transactions involving over $500,000 in goodwill, a 25% seller note was required, while transactions less than $500,000 in goodwill required a 20% seller note. The new rule lowers the cash injection requirement to 10%, meaning banks could finance up to 90% of the transaction. The lower cash requirement should make financing more accessible to small business owners.
Extended seller standby rule
Prior to recent changes, if a seller of a business provided equity through a seller note, it was on standby for two years, meaning the seller couldn’t get paid until year three. Now, the standby extends through the life of the loan, with the advantage being the standby is only applied to the equity portion of the deal. Currently, the new rule allows the seller to participate in 5% of the down payment. The seller and buyer can then structure a note that allows the seller to begin receiving payments on day one.
About CIBB
Corporate Investment Business Brokers (CIBB) has structured more than 3,000 business sales and purchases across a diverse range of industries—from local mom-and-pops to major regional companies. You can depend on the experts at CIBB for market expertise; local, regional and global marketing resource; licensed Florida brokerage; discretion and confidentiality; and transactions involving SBA lending. If you are looking to sell or purchase a business, call CIBB at (239) 936-1718.