How the SBA Can Help You Buy a Business

From zero-down financing to 10-year repayment terms, Ami Kassar explains how to make the agency’s rules work for you.

Good Morning!

Here are today’s highlights:

• Todd Graves couldn’t get financing for his chicken fingers startup.

• Gene Marks says some businesses are turning to “level funded health plans.”

• Digital shoplifting is a growing concern, and some practitioners are quite open about it.

• Mark Zandi says the threat of a government shutdown comes with the economy especially vulnerable.

FINANCE

If you want to buy a business, it’s important to know what the SBA has to offer: “The first thing to understand is that the SBA will lend only up to the appraised value of the business you are buying. No matter how optimistic the seller or broker might be, the SBA will require that your lender bring in its own SBA-certified appraiser. And that appraiser’s number will set the ceiling. Significantly, these appraisals are based on the company’s cash flow. If the appraisal doesn’t cover the purchase price, you’ll either have to renegotiate or come up with the difference yourself.”

• “Next, pay attention to NAICS codes. If you’re buying a business in the same NAICS code as your existing company, the SBA may classify the deal as an expansion loan. In that case, you could qualify for 100-percent financing—no down payment required.”

• Another point: the new business can actually be bigger than your existing business. The SBA doesn’t require the acquisition to be smaller or ‘bite-sized.’ If it makes sense strategically and financially, a smaller company can acquire a larger one.”

• “One of the primary advantages of utilizing SBA financing is its repayment structure. An SBA acquisition loan will typically give you 10 years to pay it back, with much lower down-payment requirements—possibly zero if it qualifies as an expansion loan. Compare that to conventional financing, where lenders often want 30-percent down and repayment within five years.” READ MORE