What effect has the credit crisis had?

What effect has the credit crisis had on buying and selling small businesses?

As is usually the case the answer is….”it depends”!

If you are a buyer and you qualify for an SBA loan AND the business you are buying qualifies for an SBA loan, then little has changed from a credit availability situation. At this time interest rates are down a little and there are fewer SBA lenders active in the market but there are banks willing to make SBA loans.

The biggest change we will see in the short term is that the poor economy is hurting businesses earnings and when earnings go down…. prices go down. If you are serious about buying a small biz this could be a great opportunity. BUT do your homework. Make sure you know why the biz earnings are down, don’t just assume it’s the general economy. Sometimes (often times) the biz earnings decline because of mistakes the current owner has made. Even when the economy is good some businesses lose sales and profits.

Your job is to figure out if the earnings decline is caused by something you can remedy or has there been a fatal mistake made by the seller (i.e., moved to a cheaper location but customers didn’t follow them? competitive landscape change? Regulatory restrictions?, etc.).

Do your homework, move quickly, eyes wide open and take advantage when you have a good opportunity.

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