Tips to successfully buy or sell your next business

Selling and buying a business is rarely a simple and straightforward process. When I sit down and try to categorize each of those experiences, be it from my own personal experience as a Business Broker in Sacramento or the experiences I’ve heard from the 14 Business Brokers that are part of my office, the different experiences tend to fit into one of the categories below.

The seller expects to:

1. Receive all cash up front;
2. Provide one week of training;
3. Provide the buyer with one day to do their due diligence;
4. Close the offer the day after the completion of due diligence;
5. Be paid five to six times the business earnings or discretionary earnings.

The buyer expects to:

1. Buy a business with 10% down payment;
2. Receive two months of training free of charge from the seller;
3. Have four weeks to complete their due diligence;
4. Work in the business for 30 days to “test drive” it;
5. Pay no more than one year’s worth of business earnings or discretionary earnings.

About where the seller and the buyer meet:

1. The down payment from the buyer is about equal to the business earnings or discretionary earnings;
2. Seller provides some financing;
3. Seller provides two to three weeks of training;
4. Buyer receives two weeks to complete their due diligence;
5. It takes 45 to 60 days to close the transaction if things go smoothly;
6. The business is sold between one to three times earnings with many factors affecting whether it’s one or three times earnings or something in between.

 A Golden Rule that I stress to both buyers and sellers is that the best way to get a deal done is to put yourself in the shoes of the other party. If you think about how the transaction impacts your side of the deal you will more than likely convince yourself that the other party is not offering enough. If this happens you are not ready to buy or sell. For a transaction to occur, there has to be a willing buyer AND a willing seller.

If you would like more information about buying or selling a business, visit my website; http://www.Andrew-Rogerson.com. Alternatively, I’ve written a book on each subject and these books are available from my website or www.amazon.com – Successfully Buy Your Business: Expert Advice from a Business Broker and Successfully Sell Your Business: Expert Advice from a Business Broker.

Creative finance for Buyers with limited capital

 A recent survey of members of the International Business Brokers Association (IBBA) found that business intermediaries expect the next few years to be a busy year for buying and selling businesses. Some of those transactions may need creative financing. With a busy time ahead for small business transactions, there are a number of creative financing options to consider. 

1. – Seller Financing -Increasingly, buyers and lenders are looking to the seller for financing as they try to put a transaction together. In such a scenario, the seller will hold a note at an agreed upon interest rate for a specific term or amortization – generally ranging from five to 10 years.

The terms of the sale may include a balloon payment three to five years after the purchase date. It’s a way of giving the buyer time to get up and running and to establish a successful track record with the business.

Seller financing makes the bank more comfortable with the transaction. Lenders know they have a seller who has a vested interest in the success of the business rather than one who will take their money and run. 

2. – SBA Loans - In sales of a business, conventional loans usually aren’t available, so a buyer may want to consider going to a Small Business Administration (SBA) lender, which has a number of loan options. 

The SBA guarantees a portion of the loan. The buyer pays an SBA loan fee that allows them to get funding for a loan the bank couldn’t do conventionally. If an SBA guaranteed loan goes into default, the SBA will pay the lending institution up to 75 percent of any deficit left after liquidating the collateral. 

3. – Earnouts -Earnout financing involves a certain dollar amount agreed on by the buyer and seller to be paid to the seller based on the performance of the company after the transaction is completed. Earnouts can be structured in a variety of ways and can be based on different financial benchmarks such as a company’s revenues, gross profits or net income. Earnout financing is often used for companies that are in a turn around situation or when buyers are purchasing on potential, rather than on historical cash flow. 

4. – Mezzanine Financing -In mergers and acquisitions, mezzanine financing is another alternative for a buyer looking for capital where the financing package may include interest rates of 20 to 30 percent. The lenders in this situation are typically high net worth individuals who are expecting a larger return on their investment. They are lending in a junior lien or a position behind the bank and seller financing. The loans are typically made with limited sources of collateral, thus the request for higher interest rates. 

Again, this financing is often used in funding goodwill or reputation in an acquisition. 

5. – Funding Scenario -In a million dollar transaction, the buyer would be expected to have a 20 percent down payment. The seller may hold an additional 10 to 20 percent in seller financing, and the lending institution would offer a combination of conventional or SBA financing to cover the difference, depending on collateral available.

A buyer and the lending institution must evaluate a company’s cash flow and determine if it is adequate to cover their debt service and provide a reasonable return on their investment. Lending institutions will also be examining whether a buyer’s coverage ratio, or excess cash flow after all debt is paid, is adequate to cover their needs. 

Even if you’ve been affected by a downtown in the economy in some parts of the country, don’t let that stop you from considering your acquisition options. Creative finance is a method to achieving your goal and becoming more common. 

Talk with a business intermediary representing the company you are considering purchasing. They’ll know if the owner is willing to consider seller financing, earnouts or other creative financing ideas. Based on your available capital, the business broker should be able to tell you whether you’ll be considered for the purchase and may also provide you references to various lenders that are familiar with financing the purchase of a business.

 

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

 

 

The International Business Brokers Association is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

Is your business being affected by cash flow problems?

For many small businesses across the country, these are scary times. The dramatic pullback in consumer spending is only the latest blow threatening to push some strapped small businesses out of existence. Customers are paying their bills late, cutting off cash flow, the lifeblood of a small business. Even healthy companies are being choked by the lack of credit lines and bank loans. Others are still reeling from several years of high raw-materials prices.

 

In a recent survey from the National Federation of Independent Business, more than a quarter of small business owners said the current economic downturn is threatening their ability to survive. Nearly half of respondents said slow or lost sales are their most immediate problem.

In the months ahead, “we are going to see small businesses that were marginal go out of business,” says William Dunkelberg, NFIB’s chief economist. “We’ve never seen sales trends as weak.”

Small businesses are a driver of the U.S. economy. In the past decade, small businesses — those with fewer than 500 employees — have created 60% to 80% of the nation’s net new jobs each year, according to the Small Business Administration. More than half of Americans are employed by a small business, and these companies are responsible for more than half of the nation’s nonfarm private gross domestic product.

 

Rates are between 2 ½ to 3% on the face value of the purchased invoices with the advance rate paid to the business owner of 75%.  Funding takes about two weeks with other conditions.  For more information simply send me an email:  info@andrew-rogerson.com

7 tips for a successful business loan

Money tends to rate high up on the list of needs for people planning on starting or moving into business ownership. Here’s 7 tips if you need financing for your business.

1. Clearly identify how much you have available.

The best place to start is yourself. If you have some capital available to invest in a business this is a great start as other parties you approach will take you more seriously. They will take you more seriously as they want to see that you have “skin in the game.” Once your position is clear, family and friends are the next to approach. If you say they have money make sure it truly is available. There is nothing more frustrating than approaching professional lenders with your well thought out business plan showing a clear financial plan that includes a partial capital injection from family and or friends. The lender then approves their loan subject to the other parties contributing but then everyone finds out the family and or friends have changed their mind and al the planning by all parties has been a waste of time.

2. Identify what you need.

How much capital do you need and why? Is it to buy equipment, buy inventory, pay a franchise fee, downpayment on a business or cash to fund the business operation? There are different types of lenders for different types of loans. Get the “why” worked out quickly so you can find the right lender to approach.

3. Research your options.

There are different lenders that focus in different areas of the market. The obvious place to start is your local bank or credit union. Hopefully you have a good enough relationship to speak to the business development officer at your branch or be referred to this person. If this position doesn’t exist, ask to speak with the manager. If your bank can’t help, ask for a referral to a lender that can but make sure it’s clear why you need the loan so you are introduced to the right lender. If you’re still looking for options, the Small Business Administration (SBA) has a wealth of knowledge. Search online at www.sba.gov. If you still need options, search the internet but focus on keywords that are specific to the loan you need. For example, if you need a loan for cash flow and have accounts receivable to use as collateral, use “accounts receivable loan” as your key words and you will come across lenders that provide factoring. Once you find some companies that can help, make sure you are comfortable working with them and research the full costs and terms of the loans.

4. Support your loan application.

Wanting the money for your business won’t be enough. Proving you need the money won’t be enough. A quality lender will want to see a business plan explaining how the loan will be used, a resume detailing ownership experience (and therefore the ability to repay the loan), education, credit history and most important of all in today’s economy, the appropriate management experience to run the business and therefore repay the loan. If you need help on how to write your business plan, look for the article I’ve written called “10 tips for your next business plan.”

Supporting your loan application also includes looking at your credit score and credit history. These two points are important. If your credit score is in poor shape and you can clearly explain why and the lender is comfortable with the explanation, they may approve your loan. For example, if you had an auto accident a few years ago that resulted in medical bills that are now under control, your poor credit score is explainable. Similarly, before applying for a loan get a copy of your credit report. Often there are mistakes on your credit report. Get these removed before applying for a loan so this problem is eliminated.

5. Build cash flow projections.

Lenders eat and sleep cash flow projections. This is what they do for a living. The stronger your cash flow projection the greater your chances of success in getting the loan approved. If this is not your strength, get help from your accountant or someone who knows and understands cash flow projections.

If you want some free tools to help put your loan together, visit my website www.Andrew-Rogerson.com/samples.htm and download item 4 which is a bank loan application form so you can see the questions they ask. Item 5 is a Personal Financial Statement while item 6 is a Loan Amortization Schedule that shows you how long and how much it will require each month to pay back a loan. Plus there are other options.

6. Sell your need.

Once you have the data built and ready to launch your loan application, practice your sales pitch. Don’t over embellish but be confident, know the ins and outs of why you need the loan and practice your response so you come off confident. The lenders aren’t looking for a sales pitch but they are looking to see that you believe and that if they need to escalate your loan request to higher management, you will present strongly and not have their judgment questioned.

7. Keep educating yourself.

As you work through each step of this process, ask questions. It’s amazing how options appear from places you least expect because you talk to a friend who knows someone at Rotary who specializes in these sorts of loans. Alternatively, they may not be able to help you with that loan but they can help strengthen you and your application so it gets approved…which is what this all about in the first place.

Obtaining a loan or finance for a business has been very difficult. Because the economy is stabilizing and government programs are beginning to have a positive effect, loans are available as long as you the borrower, present a professional business case.

The Benefits of Buying a Business versus Starting a New Business

This is an article for business buyers. But it also helps the seller of a business understand what a buyer should look for when acquiring a business.

So you want to be your own boss. Consider the options – work as an independent contractor…start your own business…buy an existing company. Certainly there are pros and cons to each option. If you do a careful analysis, you’ll learn what many seasoned entrepreneurs have discovered…the risk-to-reward ratio is tipped in your favor when you purchase an existing business.

Admittedly, as an independent contractor, your risk is minimal. The up front investment and overhead costs are limited. However, without the ability to leverage the work of an employee base, the returns are limited by your own personal capacity.

Starting a business of your own can pay great dividends, but it’s important to understand that the risks are significant. Most start-up businesses will falter and eventually die. According to Michael Gerber, author of The E-Myth Revisited, 40 percent of new businesses fail in the first year and 80 percent fail within five years.

On the other hand, purchasing an existing business reduces an entrepreneur’s risk while creating opportunities for tremendous profit.

There are a number of reasons to consider the purchase of an existing business rather that starting one:

• Proven Concept. Buying an established business is less risky – as a buyer you already know the process or concept works. Financing a purchase is often easier than securing funding for a start-up business for that very reason—the business has a track record. A bank will be able to look at the historical results for the business, not just rely on projections.
• Brand. You’re buying a brand name. The on-going benefits of any marketing or networking the prior owner has done will transfer to you. When you have an established name in the business community, it’s easier to place cold calls and attract new business than with an unproven start up. That’s an intangible benefit that’s difficult to put a price on.
• Relationships. With the purchase of an existing business, you will also be buying an existing customer base and vendor base that took years to build. It’s very common for the seller to stay on and transition with the business for a short time to transfer those relationships to the buyer.
• Focus. When you buy a business, you can start working immediately and focus on improving and growing the business immediately. The seller has already laid the foundation and taken care of the time-consuming, tedious start up work. Starting a new business means spending a lot of time and money on basic items like computers, telephones, furniture and policies that don’t directly generate cash flow.
• People. In an acquisition, one of the most valuable and important assets you’re buying is the people. It took the seller time to find those employees, develop them and assimilate them into the company culture. With the right team in place, just about anything is possible and you will have an easier time implementing growth strategies. Plus, with trained people in place you will have more liberty to take vacation, spend time with family, or work on other business ventures. When start-up owners and independent contractors go on vacation, the business goes too.
• Cash flow. Typically, a sale is structured so you can cover the debt service, take a reasonable salary, and have some left over to take the business to the next level. Start up owners, on the other hand, often “starve” at first. Some experts say start-ups aren’t expected to make money for the first three years.
• Risk. Even with all these advantages, some entrepreneurs believe it is cheaper, and therefore less risky, to start a business than to buy one. But risk is relative. A buyer may pay $1 million, for example, for an established business with strong cash flows of approximately $200,000 to $300,000. A lending institution funds the transaction because historical revenues show the cash flow can support the purchase price. For many people, however, that is far less risky than taking out a $300,000 loan with an unproven concept and projections that may or may not be realized.

 

Becoming your own boss always involves a risk. When you buy a business, you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a start up.

 

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.

 

 

This article is reprinted as a courtesy of the International Business Brokers Association^® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA^® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

SBA Temporary Loan Fee elimination – Abbreviated

Below is a partial press release from the Small Business Administration (SBA) regarding the elimination of loan fees for both 7(a) and 504 loans. For full details of the press release please contact the author of this blog, Andrew Rogerson at a.rogerson@murphybusiness.com

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) (P.L. 111-5). Section 501 of the Recovery Act authorizes SBA to reduce or eliminate certain fees on 7(a) and 504 loans. The purpose of this Notice is to announce the implementation of fee eliminations in the 7(a) Loan Program and the 504 Development Company Program. A notice on this subject will also be published in the Federal Register.

Fee Eliminations

7(a) loans approved by SBA on or after February 17, 2009 and to approximately December 31, 2009, SBA will temporarily eliminate the Small Business Act section 7(a)(18)(A) fees (upfront guaranty fees) for all eligible loans, including those made with higher SBA guarantees (up to 90%) as provided in section 502 of the Recovery Act.

504 Development Company Program Fee Eliminations: For eligible loans approved through the Agency’s section 504 Development Company Program on or after February 17, 2009, SBA will temporarily eliminate two program fees: 1) Third-Party Participation Fees (Small Business Investment Act Section 503(d) (2) fees codified at 13 CFR 120.972); and 2) CDC Processing Fees (13 CFR Section 120.971(a) (1) fees).

Prohibition on Use of Funds

Section 1604 of the Recovery Act states that none of the funds appropriated or otherwise made available in this Act may be used by any State or local government, or any private entity, for any casino or other gambling establishment, aquarium, zoo, golf course, or swimming pool. Further guidance will be issued on this subject in the near future.

Additional Requirements

The provisions of the Small Business Act and the Small Business Investment Act applicable to the 7(a) and 504 programs and the regulations promulgated thereunder will continue to apply to loans made under the Recovery Act.

Lenders, CDCs and/or borrowers may be subject to additional reporting or recordkeeping requirements in connection with loans under the Recovery Act.

11 reasons to reject the recession and grow your business

Many economists are predicting that with GM filing for bankruptcy on June 01, 2009 that the economy has hit bottom and will start to improve. With this being the longest recession since the Great Depression and many “green shoots” in the economy starting to appear, it’s now time to prepare for future growth and not sit back and wait for it to happen. Besides, if you don’t do these things now when will you have time? 

So here are eleven tips to be ready for growth: 

1. Let’s start with you

If you’re running a business that sells products you are used to counting your inventory. If you are a service business and don’t have inventory you understand the concept. So this idea is simple, let’s start with you. What do you need to be ready for the growth of your business – a vacation to freshen up your energy levels, some training to learn that piece of software you always wanted to know how to use, an accounting, sales and marketing or Social Network Media course.

2. Do some audits of the business

Let’s make sure we are “business ready” so when things get busy we don’t waste opportunities. Items to check in this category include your lease; when does it expire and is it worth re-negotiating with the landlord now or hiring a professional to help you do this? Update Training Manuals and Employee Manuals. If you don’t have either of them, now’s the time to do it or hire someone to do it for you. Answering the same question from each of your employees is not only repetitive but a waste of time. Making sure your manuals are also legally compliant is a good business investment. This audit can also include the corporate records of the business.

3. Review your business insurance

This idea is an extension of the above. If you’re doing a business audit, talk to your insurance agent to see what changes you need to make. You’re probably concerned some policies have gone up but it’s possible some have gone down or you can lessen coverage on some items to better handle your premiums.

4. Talk to your employees and get them motivated

The recession has been tough on everybody. Being the owner of the business we tend to think it’s been tougher on us. However, your employees have been concerned about losing their job, cuts to the numbers of hours they work, reduction in overtime or bonus’ plus their own standard of living. It’s time to re-engage them; check where they are at and what they see. Perhaps it’s time to hand them more responsibility so they can grow as the business grows but this may require training. Let’s get that training going and building a team spirit.

5. Upgrade your office equipment

If you’re working off outdated equipment and its holding back your business, now’s the time to upgrade. If the new equipment is sophisticated there will be a learning curve involved. Now’s the time to get on with it. And if you do it now, you will be ahead of your competition.

6. Upgrade your computer network

The technology experts suggest changing computers and software every 3 years. If this is critical infrastructure for your business operations now’s the time to do it. After all, we are in the 21^st century and technology is dynamic so let’s use it to its fullest extent. 

7. Upgrade your accounting system

Your accounting system is the financial life blood of your business. If you are working off old software that you’ve been threatening to upgrade, now is the ideal time. Changing systems requires proper research and validation, building a strategy to move to the new version and the associated training. Now is the perfect time to look at this option.

8. Talk with your customers

Here’s a novel idea – talk to your customers. I mean really talk to them. Find out how they are doing, how they are feeling and their view of the world. Perhaps they are thinking of spending a little more as they see things are turning around. And as they are one of your customers and already buy from you, they may be willing to buy something else you sell but didn’t realize you carried it because they were too busy to ask.

9. Update your website

For a lot of businesses, the website is the gateway customers use to decide if they want to do business with you. If your website has broken links or hasn’t been upgraded in a long time, now’s the time to have a professional refresh all your products and services and train you on any new technologies they recommend.

10. Contribute locally in your community

There are plenty of opportunities to help in your community. In fact, local communities are desperate for help. Find something that’s important to you and get involved as your help is needed and will help put your issues into perspective.

11. Create or make a communications plan

What do your employees say when they answer the phone, write in emails or when they meet customers face to face? What do your sales brochures say that you give to your clients? How about your website, business cards or advertisements? Do your current communications sound tired, bored or uninterested? Now is an ideal time to revisit what you communicate and how you communicate the products and/or services in your business.  
Is selling your business in the back of your mind? Now’s the perfect time to work through that option. Selling a business requires thought and planning. Building an exit strategy includes positioning your business correctly, not only for potential buyers but also how this impacts you personally with tax and personal financial planning issues. With unemployment so high, buyers will be looking for options other than returning to Corporate America. If you’d like more information on possibly selling your business, visit my website http://www.Andrew-Rogerson.com and buy my book – Successfully Sell Your Business: Expert Advice from a Business Broker. This 144 page book takes you through the process from start to finish on the steps to selling a business.

In summary, there are many things we can spend time on improving our business. These should all be in your business plan. If you haven’t got a business plan, now’s the time to create one. If you want a free template, visit my website http://www.Andrew-Rogerson.com/samples and download option 8.

Adding value to Your business when selling

If you’re looking to sell a business, it’s critical to look at the value of the business. But a typical business really has two values. The “academic” value is the one determined by a professional business valuation. The other is the “true market” value. The academic value is arrived at with a formula based on the firms’ hard assets, cash flow, industry averages and multiples. The fair market value also takes those items into consideration, but then considers what buyers are really willing to pay.

For many small and mid-sized businesses hard assets like equipment, vehicles, land, buildings, and inventory may be limited. For some small businesses there may be no hard assets at all. Instead, their value is based on intangibles like employees, business processes, customer lists, location and business relationships.

To maximize the fair market value of your business, it’s vital that you capitalize on those intangible assets.

• Develop key employees. Buyers generally aren’t interested in paying a premium if the business relies on you for its success. Remember to delegate responsibility to key employees and involve your key staff members in the decision making process. Demonstrating that your company’s success is reliant on your capable, well-trained employees – not just you – will pay off at the time of sale.
  
• Document what you do. Be sure that job descriptions, operation processes, and strategic plans are documented. Documented records and plans give a buyer greater comfort that he or she will be able to emulate your successful growth and will help your buyer obtain financing. Also, be sure to keep business records like sales and expense reports, internal profit and loss statements/balance sheet, and tax returns clean and well-organized.
  
• Build relationships. Name recognition, customer awareness and your reputation are all part of your business value. Even if your company doesn’t have many hard assets, your relationships are key. Consider diversifying both supplier and customer accounts.
  
• Improve cash flows. A potential buyer wants to see the “true cash flow.” And, of course, in the business world cash is king. Be sure you are driving all income to the bottom line.
• Review your assets. Sell off or dispose of unproductive assets or unsalable inventory. Remove or buy off any assets that are primarily for your personal use.
• Find and build your niche. You don’t have to be everything to everyone. Buyers will pay a premium for a niche that has barriers to competitive entry.
• Remodel, clean, and organize. What’s the first thing anyone does when they put their home on the market? They spruce things up and make sure everything is in its right place. Yet, in business, that’s rarely considered. A well-maintained facility will get the best price. Even businesses that lease space can benefit from a thorough cleaning and organization to convey a feeling of quality and efficiency.

 Keep these important intangible assets in mind if you’re looking to sell your business. They convey a value that financial statements alone do not. If you are looking to sell, make a plan. Start working on the intangibles well in advance of putting your business on the market. For many business owners, they reach a point where they burn out and psychologically retire early, before a sale is made. It’s important to work to keep your focus right until the sale is complete.

Finally, when the time to put your business on the market arrives, consider lining up key specialists who will help you make the most of the sale – an attorney, an accountant, and a business intermediary to name a few. Remember, you only have one chance to sell your business, so you want to do it right.

 

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674. This article is reprinted as a courtesy of the International Business Brokers Association^® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA^® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

Small loans to keep troubled firms afloat

The economic stimulus package includes a $35,000 life preserver for small businesses drowning in red ink.

Under the law, the Small Business Administration temporarily will guarantee 100 percent of loans of up to $35,000 issued by banks to small businesses that are struggling to make payments on existing debt. The SBA will subsidize the interest on the loan, and small businesses will have a year before they have to start repaying it.

“Our committee has heard from many firms who could be viable and grow again if they could only buy a little time,” said Rep. Nydia Velazquez, D-N.Y., who chairs the House Small Business Committee. “This new program was designed with these firms in mind.”

The loan amount may be small, but the program could help many small businesses, said Edward Tuvin, a former SBA lender who now is managing director of Creative Capital Associates, a Silver Spring factoring business.

By using banks to make these loans instead of making them itself, the SBA also “keeps bankers employed,” Tuvin said.

The stabilization loan program is one of several provisions in the stimulus package aimed at making the SBA a more effective source of assistance to small businesses during the recession. The final bill, however, does not include a House provision that would have enabled the SBA itself to make loans to small businesses if its network of private-sector lenders turned them down.

The law gives the SBA $375 million so it can temporarily eliminate or reduce fees on its regular 7(a) and 504 business loans. Lending through both programs is down dramatically this year. Slashing the fees should make the loans more attractive to borrowers and lenders.

The SBA also is authorized to guarantee up to 90 percent of 7(a) loans, except for loans made through the SBA Express program. The current guarantee limits are 75 percent for loans above $150,000 and 85 percent for smaller loans.

The increased government guarantee will “provide a higher level of protection for risk-weary lenders,” said Sen. Mary Landrieu, D-La., who chairs the Senate Small Business and Entrepreneurship Committee.

The legislation also allows small businesses to use the 504 program to refinance existing loans under certain conditions.

Nonprofit organizations will receive $6 million in additional funds to make microloans of up to $35,000 to businesses with 10 or fewer employees. An additional $24 million will be used to provide technical assistance to those companies.

The stimulus bill also includes steps to thaw the frozen secondary market for SBA loans. Many lenders must be able to sell their existing SBA loans to have enough capital to make new loans. The legislation allows the SBA to make loans to broker-dealers who purchase 7(a) loans and then pool them for sale to investors.

The new law also aims to unfreeze the secondary market for first-lien loans in the 504 program, which is used for real estate and other fixed assets. The SBA will guarantee pools of these loans, making them less risky than other mortgage-backed securities.

In addition, the bill temporarily increases the SBA’s guarantee on surety bonds from $2 million to $5 million, which “will allow more small businesses to compete for more federal projects, creating jobs now, investing in America’s future and helping to drive us out of this recession,” said Sen. Benjamin Cardin, D-Md.

This article is reprinted from the Washington Business Journal – and written by Kent Hoover Washington Bureau Chief.

Selling Your Business? Why you should use a Business Broker!

Any business owner who has sold a business on his of her own will tell you it’s a long, tedious and stressful process. It consumes time and distracts you from the day to day operation of the business. When your focus should be on maintaining or increasing the value of your business, all of your time and energy is directed to the sale process.

That’s where an experienced business broker can pay huge dividends. There are many areas where the business broker expertise pays off:

• Confidentiality. If you as an owner attempting to sell your own business, that process alone reveals that the business is up for sale. Employees, customers, suppliers and bankers all get nervous and competitors look to make a kill. A business broker will protect the identity of the company and contact only owner approved buyers through a blind profile – a document describing the company without revealing its identity.
  
• Business Continuity. Selling a business is time-consuming for an owner who already is probably wearing many hats for the company. By taking on the additional load of selling the business, essential functions will get less attention and possibly damage to the business. The owner can maintain a focus on running the business when a broker is working on the sale.
  
• Reaching potential buyers. Business brokers have the tools and resources to reach the largest possible base of buyers. They then screen these potential buyers for revenue that would support the potential acquisition.
  
• Marketing. A business broker can help present your company in the best light to maximize the sale price. He or she has an understanding of the key values that buyers are looking for and can assist in identifying changes that can lead to a better selling price.
  
• Valuing your Business. Putting a value on a business is far more difficult and complex than valuing a house. Every business is different, with hundreds of variables that have an impact on the value. Business brokers have access to business transaction databases that can be used as guidelines or reference points. But the best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business, which is much more likely using the resources of a professional business broker.
  
• Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. An experience business broker can level the playing field for a business owner making his one and only business sale.
  
• Closing a Deal. Since the business broker’s sole function is to sell the business, there’s a much better chance that a deal will be closed in less time. The faster the sale, the lower the risk of employee problems, customer defection and predatory competition. 

Utilizing the services of an experienced, professional business broker allows the owner to focus on running the business reducing the risk of business erosion during the sale process. A sale facilitated by a business broker helps maximize sales proceeds by involving a large universe of buyers in a confidential, competitive bidding process.

 

If you have a question about selling or buying your business, give Andrew a call today at (916) 570 2674.This article is reprinted as a courtesy of the International Business Brokers Association^® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and Mergers and Acquisitions. IBBA^® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.