Monthly Roundup
October was absolutely action packed at FCBB West Charlotte adding 3 new listings, one of which is making a stop with private equity before being released to the main street market. These are profitable businesses with staff so be sure to evaluate them for fit!
From a high level there’s a couple elephants in the room. First, the government shut down. Currently the SBA is not assigning loan numbers, but lenders are still preparing packets for submission and review. There will likely be a backlog upon reopen, but we wouldn’t recommend on pausing an SBA funded search.
Second is economic uncertainty and how it impacts the deal market. While it is true that layoffs have been hitting the press lately, it’s important to note that many buyers are what we call “corporate refugees”. That is, people who have had long careers in the corporate world and have either been displaced through a reduction or have elected to seek a new path. These buyers are well capitalized and present a good opportunity for sellers. We’re interested to see how it all shakes out.
Buyer tip of the month
Securing Funding
There’s multiple options for getting the money together you need to reach the purchase price. Check out a few below
ROBS - Utilize your retirement funds without penalty or tax by building your entity as a corporation and investing in your corporation. This takes some careful planning and reporting, but if you have over 50k you may have more liquidity than you think.
SBA financing - It’s a bear to get a loan for a startup, but it’s easier for purchasing an established business with cash flow. They’ll require a personal guarantee, life insurance, and collateral to make it happen but they’ll finance up to 90% of the deal
Seller financing - The seller will sometimes be willing to carry a note on the business with the business’ present and future assets as collateral.
Alternative loans - There are other organizations making loans based on current buyer income that do not collateralize the business. Typically this requires excellent credit
Personal Credit - This is where Home Equity Line of Credit, signature loans, and other personal financing comes in to play.
Seller tip of the month
Shopping brokers
Selling a business is a lot more than doing the valuation. How do you evaluate a broker?
When you reach out, do they answer the phone or respond promptly? You’re paying the tab so it’s a good bet if they don’t answer/return your call, they won’t return a buyer’s call
What is the fee structure? Are they requiring money up front, a retainer, or a success fee?
Is their background sufficient to understand your business? Have they ever run a business before? In your conversation are they asking good questions to seek understanding?
Are they local? Some people prepare some in person interaction. If that’s you, then locality may be a consideration.
Ask to review a sample CIM - This will show you how your business information will be prepared for market.
Ask about how they market while protecting confidentiality
Listings for sale
The deals are out there….