If you planned on investing in a new business in 2020, you might be feeling like your plans have been ruined by the coronavirus crisis. However, the SBA is offering a huge incentive to business buyers right now, making it a great time to buy an existing Southwest Florida business.
Right now, if you purchase a business before September 27, 2020, the SBA will make the first 6 loan payments for you. This includes all principal, interest and fees for all SBA 7(a), 504 and microloans. The payments are not deferred either, but rather completely covered by the SBA. Loans from the 7(a) program can be used to purchase a business as well as working capital, renovations, equipment, land, fixtures and several other uses. The purpose of 504 loans is to foster economic development and job creation and microloans are smaller loans that can be used for working capital, supplies, machinery & equipment, and fixtures.
This incentive for buying a business was included in the CARES act, along with the Paycheck Protection Program (PPP) and other COVID-19 stimulus money, but has not gotten as much press. There are a few things potential borrowers should know about qualifying to have their loan payments waived. The maximum loan amount for a 7(a) loan is $5 million. The loans must not only be submitted, but also issued by the SBA by September 27. This means the SBA must submit your loan number to your lender by that time. The loan process typically takes 60 to 90 days, so time is running out if you want to take advantage of this opportunity.
Many people dream about becoming business owners and being their own boss. While you might have a great idea that you are passionate about, many great opportunities already exist in the form of currently successful businesses. Obtaining a loan for an existing business is also much easier than getting one for a new business, since the company you are purchasing already has a track record. In addition, you have the benefit of starting your career as a business owner with inventory, employees and customers from day one. If you qualify for the incentive, you will be earning profits for the first 6 months without having to make a single loan payment. This will allow you the time to build up more working capital and emergency funds, helping you to increase the financial strength of your business.
The process of obtaining an SBA loan is lengthy, but they typically have better terms than traditional small business loans. The 7(a) loan can help you to fund a business and fuel it with working capital. They also sometimes come with counseling to help make sure your business runs smoothly. In addition, SBA loans are less risky, so lenders prefer to work with them over traditional loans.
While this incentive is great news for potential buyers, it is also a big help for small business owners who want to sell. Sellers always benefit when it is easier to obtain financing, because it increases the amount of qualified buyers. There are buyers markets and sellers markets, where the atmosphere for business sales is usually better for one or the other, but a favorable lending environment benefits everyone.
If you are looking to invest in a successful, proven Southwest Florida business, check out the latest business listings from CIBB, including our SBA pre-qualified listings. Are you planning on selling a company you own near Fort Myers, Naples or Sarasota? If so, contact us to start the process with a free business valuation estimate, and discover how much you can profit from selling.