While the economic impact of the pandemic has prevented countless business owners from selling, it has spawned increased interest from investors. As potential buyers seek both pandemic-proof and recovering companies, the demand for existing businesses increases. This, combined with renewed loan programs from the SBA make this a rare buyer and seller’s market. For those looking to buy a business, the current incentives will save them a significant amount of money on interest and fees. These excellent lending conditions are also making 2021 a great year to sell a business.
2021 SBA Loan Program Enhancements
SBA 7(a) and SBA 504 loans typically provide many advantages to acquiring business capital. With recent economic aid passed by Congress (Economic Aid Act), the benefits are even greater. This opportunity applies to loans approved by September 30, 2021. For starters, the SBA is increasing their loan guarantee from 80%-90%. Since they are taking on the additional risk, banks will be more willing to lend. Less risk for banks means that more buyers will qualify to purchase a business, increasing the demand even further.
The SBA will also pay the borrowers’ principal and interest for up to 3 months, up to $9,000, and waive their guaranty fee. The percentage of the guaranty fee depends on the amount of the loan, but ranges from 2.6% to 3.5%. This could amount to tens of thousands of dollars, in some cases. These loans can also include working capital to support business operations.
The current loan programs apply to business loans of $250,000 – $5,000,000, potentially more. They cover loan terms of up to 10 years for acquisitions and 25 years for real estate. The loans are fully amortized with no balloon payments and there are no prepayment penalties for terms under 15 years.
Benefits to Business Buyers and Sellers
The bottom line is that when borrowing becomes easier, both buyers and sellers benefit. For buyers, the benefit of this program is obvious. It will be easier for them to qualify and the loans are more affordable. Undoubtedly, there are many people who were not qualified to purchase a business before, but are now. This influx of qualified borrowers increases buyer competition , which is also good for anyone looking to sell. Sellers will also benefit from the September 30th deadline. This could help a lot of business owners sell faster than they normally would. It may also give some sellers added leverage in negotiations as buyers try to close before the looming deadline.
Whether you are looking to purchase an existing Southwest Florida business or sell one, CIBB can help. Our brokerage assists buyers and sellers throughout the Fort Myers, Naples, Sarasota and Tampa Bay areas achieve their goals. Whether that goal is to find a new investment opportunity, reap the financial benefits of a successful company, or retire, our experience can help your aspirations become a reality. If you are seeking a purchase, view our current listings. If you have been thinking about selling, but aren’t sure if it is the right time, contact us to get a free business valuation estimate. The results could help you determine if selling is right for you.
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