SBA Lenders Talk About Change of Ownership
Georgia’s SBA loan professionals will lead a panel discussion at the Feb. 27 GABB meeting about SBA lending rules and change of ownership requirements.
The Georgia Association of Business Brokers, the state’s only association of professionals who work to facilitate the purchase and sale of businesses and franchises, meets at 10:30 a.m. at the Atlanta Realtors Center at 5784 Lake Forrest Dr. NW, Atlanta, GA 30328. The meeting will be preceded by a free breakfast and networking session sponsored by Mark Jones of Franchise Systems Advisors.
Brian Harper
Carolyn Robinson
The Feb. 27 SBA panel will discuss “SBA’s SOP for Change of Ownership,” led by Carolyn Robinson, Vice President of Acclivity-Citizens Bank and Brian Harper, Senior Vice President of Atlantic Capital. After their presentation, several other GABB affiliate members will join Kim Eells, Vice President and business development officer at the Brand Bank, for a question and answer session. If you have any questions at all about SBA financing for the purchase or sale of a business or franchise, this session is for you.
The GABB is the state’s only association of professionals who work to facilitate the purchase and sale of businesses and franchises. The group includes business brokers as well as lenders, attorneys, business appraisers, insurance agents, environmental specialists and other professionals. GABB’s member business brokers work with businesses of all sizes to help them through all steps of selling their company: valuation, marketing, financing, and closing. Aspiring business owners also work with business brokers to purchase existing businesses at a fair price.
Kim Eells
Brand Bank Chairman to Speak Jan. 30 to GABB
Michael Coles
Michael Coles, chairman of Brand Bank and namesake of the Kennesaw State University College of Business, will speak on Jan. 30 to the state’s business brokers about principles for success in business.
His Jan. 30 speech to the Georgia Association of Business Brokers, the state’s professional group for buying and selling businesses, will start at 10:30 a.m. at the Atlanta Realtors Center at 5784 Lake Forrest Dr. NW, Atlanta, GA 30328. The meeting will be preceded at 9:45 a.m. with a free networking session with coffee and pastries sponsored by GABB Affiliates Susan Kite and Kim Eells, both Vice Presidents of Government Guaranteed Lending with the Brand Bank.
Deeply involved in the community, Michael Coles is a transformational leader, accomplished entrepreneur, education advocate and motivational speaker. He is living proof that there are no limits to what we as individuals can accomplish. His GABB presentation is “The 10 Lessons That Have Guided My Business Life.”
After a successful 19-year career in the clothing business, Michael tested his entrepreneurial skills in 1977 when he co-founded Great American Cookie Company with an investment of only $8000. Shortly after starting the company, he was involved in a near-fatal motorcycle accident and was told by doctors he would never walk again unaided. As Michael recovered thru a self-designed rehabilitation program he took the Company from its first store in Perimeter Mall in Atlanta to hundreds of stores nationwide and at the same time set 3 coast-to-coast cycling records. When Michael started the Company there were three major cookie companies in business; one had almost 100 stores and the other two had fifty each. When he sold the Company in 1998 with sales over $100 million, Great American Cookie Company was the largest franchisor of cookie stores and the other three companies no longer existed.
Michael’s commitment to community service led him to run for public office in 1996 as the Democratic nominee for the House of Representatives in the Sixth District and in 1998 he won the Democratic nomination for U.S. Senate, challenging Senator Paul Coverdell.
In 2003 Michael accepted the corporate reins of Caribou Coffee Company as Chairman, CEO and President. Over the next five years Michael more than doubled the size of the company extending the brand reach domestically and internationally. In September 2005, he successfully took the company public on NASDAQ under the symbol CBOU.
Coles was one of the founders of Charter Bank & Trust and served as its Chairman, taking the bank public and selling the publicly traded company to Synovus Bank.
Appointed by Governor Roy Barnes in 1999 to chair the Georgia Film, Video and Music Advisory Board, during his four years as Chairman, Michael took it from $170 million to over $1.5 billion in economic impact.
Having contributed much of their time and resources to education, the arts, environment and philanthropic organizations, Michael and his wife, Donna were honored as the Georgia Philanthropists of the year in 1995.
Michael was appointed by Governor Roy Barnes in 2001 to serve on the Board of Regents of the University System of Georgia.
Michael now serves as Chairman of Brand Holding Company and Chairman of Brand Bank.
In recognition of Michael’s success, leadership and benevolence, Kennesaw State University, under the authority granted by the Board of Regents of the University System of Georgia, declared that the institution’s School of Business be named and known in perpetuity as the Michael J. Coles College of Business at Kennesaw State University. In 1999 Michael received the Honorary Doctor of Human Letters Degree from Kennesaw State University.
As Entrepreneur in Residence for the Coles MBA 2013 Spring Semester, Michael led a class entitled “Concept to Counter”, allowing students to grasp the concept of taking their creative thoughts and ideas to the marketplace.
Michael received the National Women’s Political Caucus Good Guy of the Year Award for his work on behalf of women’s issues. He joined the ranks of past recipients, including Ed Asner, Alan Alda and former Vice President and U.S. Ambassador to Japan, Walter Mondale.
Michael continues to serve on numerous non-profit boards. He lives in Atlanta with his wife Donna and they are the parents of three adult children and seven grandchildren.
The GABB is the state’s only association of professionals who work to facilitate the purchase and sale of businesses and franchises. The group includes business brokers as well as lenders, attorneys, business appraisers, insurance agents, environmental specialists and other professionals. GABB’s member business brokers work with businesses of all sizes to help them through all steps of selling their company: valuation, marketing, financing, and closing. Aspiring business owners also work with business brokers to purchase existing businesses at a fair price.
GABB meetings are free and open to the public, but we ask that you let us know you are coming by filling out this form.
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How Business Brokers Can Close A Deal Faster
Photo by Redd Angelo. https://unsplash.com/@reddangelo16
Susan Kite, Vice President of SBA Lending for The Brand Bank moderated a panel of SBA lenders for the GABB April 25 meeting.
She offers these suggestions to business brokers on ways to get a deal closed faster.
Get Seller Information as quickly as possible after signing a listing agreement. That information should include:
- Last 3 years’ Federal tax returns (if sole proprietor, get Schedule C)
- YTD interim statement to include Balance Sheet & Income Statement
- Previous year’s interim statement of same period
- Aging of Accounts Receivable and of Accounts Payable
- Listing of all assets being sold – and their market value (with serial numbers for any asset valued at $5,000 or more)
- Letter of Intent or Purchase Agreement
Manage Seller expectations
- They will likely have to take a Seller Note of 10% to 15% of sales price
- They will need to update Interim Financials and Agings every 60 – 90 days
Get Buyer information as soon as possible
- Last 3 Years Federal Tax Returns – Personal and Affiliate
- Recent Personal Financial Statement – give them form 413
- Business Plan (good template is at sba.gov)
- Financial Projections (monthly for Year 1 / Annually for Years 1-2)
- Personal Information Form 1919
Manage Buyer expectations
- Buyers will have to put in cash equity of 10% to 25% of sales price
- They may have to pledge their home or other real estate
- They will need to assign to the lender life insurance
- A business acquisition loan process is not like buying a home – it may take longer than they expect.
Lender Info
- Use a GABB Affiliate lender that knows business acquisition SOP rules
- Get with a lender early and use them as a resource
- Realize that to lenders, EBITDA is more important than SDE
- All add-backs must be verified
- Have your Seller and/or Buyer prepared with an organized application package
- The process will be much faster when information is provided quickly when requested
For more information, contact Susan Kite, VP SBA Lending / The Brand Bank / skite@thebrandbank.com / 770-595-9734
Read MoreHow to Get Approved for an SBA Loan to Buy a Business-April 25 GABB meeting
Susan Kite, Vice President of Government Guaranteed Lending for the Brand Bank
You’ve either got a business to sell, or want to buy a business. So getting an SBA loan may be the key to closing the deal.
How do you make sure that the loan is approved, whether you’re the buyer or the seller?
On April 25, a panel of SBA lenders convened at the Georgia Association of Business Brokers meeting. Susan Kite, Vice President of Government Guaranteed Lending for the Brand Bank moderated the panel. Panelists included Claudia Wilson, Vice President at The Piedmont Bank; Ryan Stoll, SBA Business Development Officer with Wells Fargo SBA Lending; and Brian Harper, Senior Vice President of SBA Lending at Atlantic Capital Bank.
The meeting was held on Tuesday, April 25, at the Atlanta Realtors Center at 5784 Lake Forrest Dr. NW, Atlanta, GA 30328. The GABB’s business meeting begins at 10:30 a.m. is preceded by a 9:45 a.m. networking session with coffee and pastries. There is no charge to attend the GABB meetings; dress is business casual. Directions here or below.
Stuart Oberman of the Oberman Law Firm sponsored the meeting.
The GABB is the state’s only association of professionals who work to facilitate the purchase and sale of businesses and franchises. The group includes business brokers as well as lenders, attorneys, business appraisers, insurance agents, environmental specialists and other professionals. GABB’s member business brokers work with businesses of all sizes to help them through all steps of selling their company — valuation, marketing, financing, and closing. Aspiring business owners also work with business brokers to purchase existing businesses at a fair price.
Last May, a similar SBA panel discussed SBA lending. They recommended that aspiring borrowers get the information to lenders early, be honest up front about potential problems, and expect to pledge assets, including a home, to secure the loan.
SBA provides an array of financing for small businesses from the smallest needs in microlending – to substantial debt and equit
y investment capital (venture capital). The SBA participates in a number of loan programs designed for business owners who may have trouble qualifying for a traditional bank loan. SBA loan applications are structured to meet SBA requirements, so that the loan is eligible for an SBA guarantee. This guarantee represents the portion of the loan that SBA will repay to the lender if you default on your loan payments.
Directions to the GABB meeting location at the Atlanta Realtors Center:
From the South: I-75 north to I-285 east or I-85 north to I-285 west. Exit at Roswell Road south and turn right onto Northwood Drive. Turn right onto Lake Forrest. The Atlanta REALTORS® Center on the left at the stop sign (intersecting Allen Road).
From the North: Take GA 400 south and change to I-285 west. Continue as above via Roswell Road.
From East or West: I-285 to Roswell Road. Continue as above.
There is no charge for parking.
For more information about the GABB, contact Diane Loupe at georgiabusinessbrokers@gmail.com or GABB President Mike Ramatowski at 770-634-0428.
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SBA Lenders Offer Advice on Getting Loans Approved
SBA lenders Kim Eells, Cheryl Beer and Susan Kite presented at the April GABB meeting.
If you want to get an SBA loan to buy or sell a business, get the information to lenders early, be honest up front about potential problems, and expect to pledge assets, including a home, to secure the loan.
That advice highlighted the presentation by veteran SBA lenders to the Georgia Association of Business Brokers on April 26.
Bob Smith of HealthMarkets.com was the breakfast sponsor.
The program was presented by GABB Platinum Sponsor Cheryl Beer, Vice President of SBA Lending at the Piedmont Bank; Susan Kite, SVP and Managing Director of SBA Lending at Signature Bank ; and Kim Eells, Vice President, Business Development Officer of the Brand Bank.
GABB SBA Power Point Presentation
SBA Loan Program Overview
- SBA 7(a) – $5,000,000 maximum loan amount
- Small by SBA Size Standards
- Operating Company must be “For Profit”
- 15X Debt Service Coverage, “DSC” (including all affiliates)
The SBA 7(a) program has a $5 million maximum, with 1.15 x debt service coverage, and operating company must be for profit.
Equity injection: minimum usually 20%, but other factors may affect the percentage, including cash flow, collateral and experience.
The maximum term of the loan is 10 years for purchase of a business only, 25 years for real estate, and a weighted average for combined business and real estate.
The maximum rate for the loan is prime plus 2.75%
Collateral required includes business assets and personal assets of guarantors.
SOP rules:
- The buyer must purchase 100% of the ownership interest in the business;
- The seller cannot remain an officer, director, stockholder or key employee of the business. If a short transitional period is needed, the small business may contract with the seller as a consultant for a period not to exceed twelve months;
- If the purchase price of a business includes intangible assets in excess of $500,000, the borrower and/or seller must provide a combined equity injection of at least 25% of the purchase price of the business. In order for the seller financing to qualify as equity injection, the seller note must be on full standby of principal and interest payments for a minimum of two years. If the total “equity” is greater than 25%, there can be two seller notes. For example, if the buyer has 20% equity and the seller provides 20% seller financing, there can be two seller notes, one for 5% on full standby for two years and one for 15% with immediate P+I payments;
- If there is business real estate as part of the change of ownership, the real estate cannot be financed separately by a non-SBA guaranteed loan (unless it is an SBA 504 project) to avoid the 25% cash injection;
- The lender must obtain a current business valuation from an independent third party chosen by the Bank to justify the purchase price.
How to get your loans approved quickly
- Get Seller Information as quickly as possible after signing listing agreement
- Last 3 years tax returns (if sole proprietor, get Schedule C)
- YTD interim statement to include Balance Sheet & Income Statement
- Previous year’s interim statement of same period
- Agings of Accounts Receivable and of Accounts Payable
- Listing of all assets being sold – and their market value (with serial numbers for any asset valued at $5,000 or more)
- 4506-T, properly signed
- Letter of Intent or Purchase Agreement
- Manage Seller expectations
- They will likely have to take a Seller Note of 10% to 15% of sales price
- They will need to update Interim Financials and Agings to keep them current (every 60 – 90 days)
Buyer Info
- Get Buyer information as soon as possible
- Last 3 Years Tax Returns – Personal and Affiliate
- Recent Personal Financial Statement – give them form 413
- Business Plan (good template is at sba.gov)
- Financial Projections (monthly for Year 1 / Annually for Years 1-3)
- Manage Buyer expectations
- They will have to put in cash equity of 10% to 25% of sales price
- They may have to pledge their home or other real estate
- They will need to assign us life insurance
- If your buyer has ever been arrested, they need to tell us early so we can get them cleared and processed
- The loan process is not like buying a home – it may take longer than they expect.
Lender Info
- Use a lender that knows business acquisition SOP rules
- Get with us early and use us as a resource
- Realize that to us, DSC is more important than SDI
- Have your Seller and/or Buyer prepared
- with an organized application package
- with realistic expectations about the loan process
- The process will be much faster when information is provided quickly when asked
The Panelists also discussed three examples of loans they encountered.
Example 1:
30 year old niche therapy practice that provides occupational therapy, physical therapy and Speech-Language therapy to school systems.
Buyer has owned a business in home health care.
Total Project Costs of $1,950M included Intangible Assets of $1,600M, Working Capital of $300M, Closing Costs including SBA Guaranty Fee of $50M – Seller Financing of $350M, Buyer’s Cash $100M – SBA Loan $1,500M
Only collateral was a 2nd lien on personal residence.
Example 2:
35-year old Commercial Landscaping company – 3 owners in 60s and retiring. Sales price of $1,605,000 included property, trucks, goodwill. Property valued at $600,000 assets valued at $280,000 with $805,000 goodwill. 2 loans: Building loan at P+2.5% for 25 years and business acquisition at P+2.75% for 10 years with 6-months interest-only for both. Financing structure: $540,000-property, $448,000-business and assets, $136,000-working capital and closing costs, $263,000 – borrower cash, and $360,000 seller note. Buyer was ready to close with out-of-state lender when his partner pulled out, changing deal. We closed 35 days after being notified that the buyer wanted us to consider the deal.
Example 3:
distributor of parts for communications companies that service cell phone towers.
Two husband/wife teams with varied sales and management experience
Total $1,211 included $918 GW, seller 225, equity $269, loan $717, 10 years, P + 2.5, $100 Capline
Collateral included personal assets of Guarantors
Why Loan Applications Get Rejected
Delinquent credit history – 650 minimum score
SBA eligibility issues
- 912 issues
- Presently under indictment, parole or probation
- Ever been charged with and or arrested for any criminal offense other than a minor motor vehicle violation? Include offenses which have been dismissed, discharged or not prosecuted.
- Ever been convicted, placed on pretrial diversion, or placed on any form of probation, including adjudication withheld pending probation for any criminal offense other than a minor vehicle violation?
- Not citizen or permanent resident
- Problems with Franchisor
- SBA failure rate for franchise
- Franchisor has reputation for not supporting its franchisees
- Talk to other franchisees
- Talk to financial institutions who have financed particular franchise
- Unrealistic projections
- Use financial advisor to prepare business plan and projections
- Breakeven analysis
- Other issues
- Insufficient working capital and equity
- Additional support
- Spousal income
- Strong franchisor support
- Strong location
- Strong credit history
- Liquidity
- Management experience
Finally, if you get turned down by a Bank, ask for the reason. The information may help you with another lender or for your next request
Contact information for presenters:
Susan Kite
404-256-7734
Kim Eells
770-339-2088
Cheryl Beer
678-576-9392
Cheryl.beer@piedmontbankonline.com
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