The Main Street Lending Program
There is no doubt that the COVID-19 situation seems to change with each and every day. The disruption and chaos that the pandemic has injected into both daily life and business is mirrored in the government’s response.
In this article, we’ll turn our attention to an overlooked area of the government’s pandemic response and how businesses can use a whole new lending platform to navigate the choppy waters.
As the pandemic continues, you will want to be aware of the Main Street Lending Program, which is a whole new lending platform. The Federal Reserve established the Main Street Lending Program to support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. Authorized under the Coronavirus Aid, Relief & Economic Security (CARES) Act, the Main Street Lending Program is quite attractive for an array of reasons. Let’s take a closer look at what makes this program almost too good to be true.
This lender-delivered program is a commercial loan. Unlike the PPP, there is no forgivable component. However, the Main Street Lending Program has one feature that makes it attractive to all kinds of businesses. It can be used to refinance existing debt at a rate of around 3%. However, businesses cannot refinance existing debt with the current lender. Instead, a new lender must be found. Generally, loans are a minimum of a quarter-million dollars and have a five-year term. Another attractive feature, there is a two-year payment deferment period. There is no penalty for prepayment.
To be eligible for a Main Street Lending Program loan, a business must:
- Have been established before March 13, 2020
- Not be an ineligible business according to Small Business Administration (SBA) regulations
- Have no more than 15,000 employees or 2019 annual revenues of no more than $5 billion
- The SBA’s affiliation rules apply in determining the employee and revenue count
- In counting employees, the Main Street Lending Program advises businesses to refer to SBA regulations by counting all full-time, part- time, seasonal, or otherwise employed persons, excluding volunteers and independent contractors
- Have been created or organized in the U.S. with significant operations in and a majority of its employees based in the U.S.
- Not also participate in one of the other Main Street loan facilities, as well as the Primary Market Corporate Credit Facility
- Note: Businesses that received support through the SBA Paycheck Protection Program (PPP) are eligible to receive a Main Street loan
- Not have received specific support pursuant to the CARES Act (Subtitle A of Title IV for air carriers, air cargo, and businesses critical to national security)
The Main Street Lending Program is not just for refinancing existing debt. Lenders make the loans and then sell 95% of the loan value to the Fed. This of course means that the lender is only required to retain 5% of the loan on their balance sheet. The end result is that lenders can dramatically expand the amount of loans they can make.
Whether it is the PPP or a program like the Main Street Lending Program, there are solid options available to help you. Businesses looking to restructure debt or put an infusion of cash to good use may find that the program offers a very flexible loan with great interest rates.
Copyright: Business Brokerage Press, Inc.
The post The Main Street Lending Program appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Why Does Your Business Need Google Reviews?
In today’s business climate, reviews are the differentiator. Years ago, people commonly asked for references when they were vetting a product or service. But these days when people are searching for a local business to work with, they are likely to conduct research on their own and read online reviews.
Google reviews can give businesses a big credibility boost without having to spend a dime. Let’s take a look at some of the key benefits.
Increased Credibility & Trust
Approximately 91% of consumers read reviews to determine credibility of a local business. In fact, 84% of consumers say the positive reviews have helped them gain trust. Without the reviews, that level of trust would not have been established.
Needless to say, people trust Google. The fact that these reviews are on a third party website increases transparency. These reviews have much higher value than testimonials posted on the actual business website.
Improved Business Conversions
Once a potential customer gains trust in your company through reading Google reviews, it is more likely the conversation will get converted to an actual business transaction.
Customer Feedback Loop
When your customers write reviews about your business and post them on Google, these reviews often clearly mention details about your product or service. Through this means, future customers become educated. These reviews can also serve as a feedback loop for you if things need improvement.
Increases Online Reputation & Visibility
The power of online marketing methods you might be using to promote your business will be amplified, as users will become more attracted to your business due to 5-star reviews. This factor increases online traffic to your website and an increase in leads and business.
Another fact to be conscious of is that your clients will review your products or services whether you want them to or not. If you fail to set up Google reviews, you’re missing out on the opportunity to gain a level of control and visibility.
How to Set Up Google Reviews
- Create a Google My Business account. – Visit https://business.google.com/ to sign in or create a Google account for a business. Complete the step by step process by filing required information like email, phone number, business details, etc.
- Ask clients to review your services. – Start sharing your Google My Business URL with clients and ask them to post a review about your services. When asking for reviews, you can mention to clients that their review will help everybody else make an informed decision when they are looking for help. It is important to ask about the review within a few days of closing your transaction. If more time goes by, the client may be less motivated to post a review for you.
- Remind clients. – Everybody is busy. Therefore, there is a chance that your client might forget to write a review. In this case, we recommend reminding them to do so. You can also politely inquire if they need any help posting the review that you discussed.
Through the above-mentioned process, you can begin generating reviews for your business. Of course, it goes without saying that you can only guarantee good reviews when you are providing excellent customer service along with a top-notch product or service.
Copyright: Business Brokerage Press, Inc.
The post Why Does Your Business Need Google Reviews? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Seller Financing: It Makes Dollars and Sense
When contemplating the sale of a business, an important option to consider is seller financing. Many potential buyers don’t have the necessary capital or lender resources to pay cash. Even if they do, they are often reluctant to put such a hefty sum of cash into what, for them, is a new and untried venture.
Why the hesitation? The typical buyer feels that, if the business is really all that it’s “advertised” to be, it should pay for itself. Buyers often interpret the seller’s insistence on all cash as a lack of confidence–in the business, in the buyer’s chances to succeed, or both.
The buyer’s interpretation has some basis in fact. The primary reason sellers shy away from offering terms is their fear that the buyer will be unsuccessful. If the buyer should cease payments–for any reason–the seller would be forced either to take back the business or forfeit the balance of the note.
The seller who operates under the influence of this fear should take a hard look at the upside of seller financing. Statistics show that sellers receive a significantly higher purchase price if they decide to accept terms. On average, a seller who sells for all cash receives approximately 70 percent of the asking price. This adds up to approximately 16 percent difference on a business listed for $150,000, meaning that the seller who is willing to accept terms will receive approximately $24,000 more than the seller who is asking for all cash.
Even with these compelling reasons to accept terms, sellers may still be reluctant. Selling a business can be perceived as a once-in-a-lifetime opportunity to hit the cash jackpot. Therefore, it is important to note that seller financing has advantages that, in many instances, far outweigh the immediate satisfaction of cash-in-hand.
- Seller financing greatly increases the chances that the business will sell.
- The seller offering terms will command a much higher price.
- The interest on a seller-financed deal will add significantly to the actual selling price. (For example, a seller carry-back note at eight percent carried over nine years will double the amount carried. Over a nine-year period, $100,000 at eight percent will result in the seller receiving $200,000.)
- With interest rates currently the lowest in years, sellers can get a much higher rate from a buyer than they can get from any financial institution.
- The tax consequences of accepting terms can be much more advantageous than those of an all-cash sale.
- Financing the sale helps assure the success of both the sale and the business, since the buyer will perceive the offer of terms as a vote of confidence.
Obviously, there are no guarantees that the buyer will be successful in operating the business. However, it is well to note that, in most transactions, buyers are putting a substantial amount of personal cash on the line–in many cases, their entire capital. Although this investment doesn’t insure success, it does mean that the buyer will work hard to support such a commitment.
There are many ways to structure the seller-financed sale that make sense for both buyer and seller. Creative financing is an area where your business broker professional can be of help. He or she can recommend a variety of payment plans that, in many cases, can mean the difference between a successful transaction and one that is not. Serious sellers owe it to themselves to consider financing the sale. By lending a helping hand to buyers, they will, in most cases, be helping themselves as well.
The post Seller Financing: It Makes Dollars and Sense appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Buying A Small Business: Earnest Money Deposits Should Be Reasonable
By Peter Siegel MBA, BizBen Founder, ProBuy, ProSell, ProIntermediary Programs
I was speaking with a prospective business buyer the other day – he had just signed up to get business purchase financing. He said he wanted the business; however, he was uncomfortable putting down a 10% deposit for a $350,000 business. He asked if he could lower the deposit requirement to $5,000.
I asked a business broker that day on the phone what his opinion was on earnest money deposits for escrow/bulk sale accounts when selling a small business, here is what he told me via email:
Earnest money deposits serve two purposes.
First, they show the seller that you are serious about buying the business. Secondly, in the event that you as the buyer default on the purchase agreement after due diligence and other contingencies have been removed, the earnest money deposit typically serves as liquidated damages to the seller. Would you as a business owner take an offer for your $350,000 business seriously when it was accompanied by a good faith deposit of only $5,000? Would you allow someone to tie up your business for 30, 45, 60 days or more with only $5,000 in escrow?
Occasionally a buyer will write an offer, provide a 10% deposit check and then ask that it be held for two to four weeks or more until all contingencies have been removed. A good faith deposit that can’t be deposited is no good faith at all. The contingencies in a purchase agreement protect you as the buyer, and if you walk away from the transaction before the contingencies have been released, your deposit will be returned to you less any escrow costs incurred. It is your good faith deposit that is supposed to help protect the seller in the transaction. If the check can’t be deposited then what good is it? The buyer is literally asking to tie up the seller’s business for two to four weeks or more with nothing.
The basic rule is this – When there is no money, there is no Buyer.
A 10% deposit shows good faith, shows your intent to purchase the business, and separates the buyers from the shoppers.
Buying a business is a serious process, and offers should not be made lightly. If you don’t know enough about the business to be confident enough to put down a 10% deposit, continue your research until you are more confident. When you are ready to make an offer, show the seller you are serious about buying his/her business. You will find that your offer will be more readily accepted when it is accompanied by a standard 10% deposit.
If you really want to stand out above the rest, provide a cashiers check for the deposit. Then you truly have shown the Owner/Seller your intention to buy their small business is serious.
Orange County, Calif., business broker Joe Ranieri, said “the minimum I want to see when opening escrow is $10,000. Anything less and I feel the buyer is not showing enough commitment. Granted, we all know that a buyer can invent any reason for canceling an escrow, and possibly get a percentage of the deposit back, but $10,000 shows good faith.”
If the purchase price is north of $200,000-$250,000, Ranieri said he would encourage the seller to ask for a greater amount for the security deposit. “I remind the buyer, that from the seller’s perspective, that once we open escrow, the business is basically off the market, unlike selling a house which can accumulate many back up offers, but with a business, many buyers will simply look somewhere else once it’s in escrow.”
San Francisco business broker Timothy Cunha said the “good faith refundable deposit” is often the major impediment to an offer being made and accepted. “And it should be – neither the buyer nor the seller is benefited by a half-hearted mediocre interest in the business,” he said.
A properly drafted contract will stipulate that the deposit go to an independent escrow agent and to be fully refundable if the purchaser terminates the contract prior to the end of due diligence “for any reason or for no reason.” Cunha says he “will only use an escrow agent who will charge no escrow fee until due diligence has expired and they actually begin their work.”
The deposit is important because “once the business goes into contract, the business is effectively off the market; it cannot be shown and no other offer can be accepted,” Cunha says. “The seller has to know the buyer is serious before shutting down the marketing “funnel.” ”
“If the buyer can’t raise 10% of the purchase price for a deposit, it is highly unlikely that he or she has the requisite cash to be a serious prospective purchaser of the business,” he said. “And, the deposit should be substantial enough to signify the commitment of the buyer – 10% is a good number that seems to work for most deals under a half million dollars; for higher purchase prices, sometimes a deposit between 5% and 10% can be negotiated.”
This article originally appeared on the BizBen blog.
Read MoreWhere Did the Cash Go? Add-Backs to Consider When Buying a Business
Accountants routinely assist business owners to help accomplish the goal of minimizing taxes. But, to truly understand the value of the business and accurately project future cash flow, it is important to look beyond the tax returns to realize how the money is being spent.