Ten things a business broker needs to know to get financing
10 Things a Business Broker Needs to Know
Presented by Susan Kite, VP, SBA Business Development Officer
Signature Bank
6065 Roswell Road, Suite 600
Atlanta GA 30328
770-595-9734
1. We can’t process your deal until we have:
Seller Provides:
1. Last 3 years Business Tax Returns
2. Signed 4506 T
3. Recent Interim Business Financial Statement (not > 45 days old)
4. Aging of Accounts Receivable
5. Aging of Accounts Payable
6. List of Assets being sold with Serial Numbers for items valued > $5K
Buyer Provides:
1. Last 3 years Personal Tax Returns for all 20% or more owners
2. Last 3 years Business Tax Returns for all affiliate businesses
3. Personal Financial Statements
4. Business Plan with Financial Projections
5. SBA Application Form
2. Your buyer needs cash in the deal
• Amount needed is up to the lender (typically 10% minimum)
• 25% is required if amount of goodwill financed is over $500K
• Can be shared with Seller in form of Standby Note
• Equity can be buyer’s cash on hand, a gift supported by a gift letter, personal loan or heloc, or assets other than cash
• Equity must be supported by 2 months of statements, or outside appraisal
3. Your buyer needs a well thought out Business Plan
A good resource is the U.S. Small Business Administration’s guide to writing a business plan.
The SBA also provides a good template for writing a business plan.
A more in-depth guide is here.
4. The Business Plan must include financial projections
• On a monthly basis for the first year, and
• On an annual basis for years 1 – 3
• Must include Notes as to how the numbers were arrived
5. Your buyer must clearly articulate how their background and experience will directly translate into successful ownership of the particular business they are buying.
6. Buyer cannot be incarcerated, on probation, parole, under indictment for a felony or a crime of moral turpitude, or who are presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction.
7. Buyers must be lawfully in the U.S.
8. For loans in excess of $350,000, SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount. If fixed assets do not fully secure the loan, the lender must take available equity in the personal real estate of the principals as collateral.
9. Seller should be prepared to take back a Note
• Generally strengthens the deal
• Helps compensate for collateral shortfall
• May be needed for equity; if so, SBA counts it as equity if it is a
* Standby Note with no payments for the life of the SBA loan
* Standby Note with interest-only payments IF the historic business cash flow shows debt service coverage
* Standby Note with no payments for the first 2 years IF used as part of the 25% equity required when goodwill is over $500K
10. If the amount of goodwill financed by lender and seller is over $250K, a professional business valuation must be performed.
Susan Kite
VP, SBA Business Development Officer
Signature Bank
6065 Roswell Road, Suite 600
Atlanta GA 30328
770-595-9734
Visit us at: www.sbaloansatlanta.com
and: www.signaturebankga.com
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