Contact one of these offices to see if your business qualifies for an SBA Loan
If you want to buy a business go to Sunbelt Business Brokers to find an office near you.
For articles about how to Buy a Business visit our article library.
There are many good reasons to get a business appraisal valuation on your business. Here’s a list:
- So you can keep track of what business value you are building not just what income you are generating.
- So you would know if someone made you an offer to buy your business that you should take. Don’t rely on a buyer doing a business appraisal, you need to have one.
- So you know what the Small Business Administration would value your business for if you applied for an SBA Loan.
- So you know how much life insurance you need to buy-out a partner’s interest if something bad happens.
- So you know how much you could lose by not properly segregating your personal and business risks.
Please read number 5 again………..
Recently I wrote a post about how businesses should document their systems to improve their profits and value.
I received some feedback that went something like this..
“Which systems, there are a million systems in my business!”
Well, you’re correct. Even a small business has many different systems. How you answer the phone, how to install the widget, how to log into your QuickBooks, it goes on and on.
So where should you start?
My advice is to make your first written/documented system the one that is most critical to the success of your business. That means you can rule out how to log on to your computer, how to check voice mail, how to refill the paper in the copier.
Here are some examples of critical systems for various businesses:
- If you have a staffing firm you need a great system for interviewing potential hires.
- If you have an auto repair shop you need a great system for diagnosing car problems.
- If you own an ice cream store you need a system to make sure the ice cream temperature is always perfect.
What’s the most critical system for your business? You’ll need to decide, then write it down, diagram it, draw it… do whatever you need to do to make sure that someone can do it if you’re on a sail boat in the middle of the ocean.
If it’s in your head it’s only useful to you, if it’s documented it’s valuable.
Why SBA Loan Production is Down
Sheila Spangler, CBI, Capital Strategies, Boise, ID
There was an article recently on CNNMoney.com that said SBA loan production is down 36 percent from 2008. As business brokers, many of us have felt that pinch first hand, but have you wondered why SBA loans have waned along with the rest of the credit market? After all, don’t those loans have a guarantee? Why won’t the bankers make them? I decided to do a little research.
As a former commercial banker, banking school graduate and business broker, I am a big fan of SBA loans. I’ve originated many in the last 20 years. Without these loans, my main street business clients would not have been able to sell their businesses to new owners or expand. We are suffering through the worst economic crisis since the Great Depression. During the Depression, interest rates were too high and no one could afford to borrow even though there was plenty of liquidity. Today, the problem is different. Rates are low yet liquidity is even lower for banks. Here’s two reasons why banks aren’t willing to open the credit spigot:
1) Unhealthy balance sheet. Just because a bank may have paid back TARP, it doesn’t mean the bank is “healthy.” In many cases, problem loans are not being addressed because doing so would cause write-downs, which erode bank capital. The regulators are stepping softly in many cases encouraging bankers to term out loans for longer than normal periods to avoid losses, business closures and panic. But in many cases, the bankers are using a “head in the sand” approach and not addressing problems.
2) Fear of making the wrong decision. Bankers are running scared. The lack of capital and unaddressed time bombs on the balance sheet has made them even more cautious than normal. They are playing a waiting game: waiting for things to get better. But it’s a catch 22. Eventually, someone has to step forward and lead the charge. Of course, just like the eager lieutenant on the battle field, there is always a chance they’ll get shot in the back, too.
You’re probably thinking “Okay, but why don’t banks make SBA loans since they have a government guarantee? Aren’t they completely safe for the banks? What have they got to lose?”
Here are my top four reasons why SBA loan production is down. These reasons are based on experience and conversations with bankers, regulators and debt buyers.
• Laid off their experienced SBA business development officers and underwriters when the market melt down happened last year.
• Don’t want to learn the program because they perceive the return to be low, and for many, what they don’t understand, they fear.
• Know that even if they get the SBA loan done properly, there is really no assurance that the bank will be able to collect on the guarantee to get “paid back” should the business fail. The loan must be properly underwritten and serviced in order to maintain the guarantee for the life of the loan.
• Don’t like unknowns and right now everything is an unknown. Is the seller’s business really able to withstand a transition now? Does the buyer really have the skills to manage and lead? Is there a hidden problem?
It’s going to be awhile before the credit market loosens. In the meantime, buyers and sellers of businesses have to get more creative and flexible. This means sellers will have to self-finance more of the transaction. That’s good for buyers but not so good for sellers that want to exit the business and not worry about it any more.
In some cases, the business owner may not be able to sell the business at all. So he or she will have to continue to work longer. This is heartbreaking for many business owners. Some have worked years to build their businesses and now see them falter just when its time to retire.
The only thing I can say is this: business owners are the toughest people in the world. Just like everything else in your business life, you’re going to have to find a way to fix this yourself. Perhaps we can form a business owner’s co-op and provide loans to each other to take the banks out of the picture. Now wouldn’t that be something?