How Buyers Acquire Small Business Financing

Written by Gene Wright. Posted in Small Business Funding

A buyer with 100% cash is rare. Some sort of financing will most always be needed to close the deal. There are various options for financing covered below with the understanding that buyer qualification is the key element. The ability to finance a buyer purchase is often the make or break point to closing.

Let us dispel one myth; the misconception that the owner HAS TO hold a note or mortgage on the business to get a deal closed. This is not true, and it totally rests with each owner’s preference. While we contend that selling a business with some amount of owner financing makes it slightly easier to sell, we always advise owners to speak with an accountant about the pros and cons to holding a loan on their business.

Three types of financing…

  1. Owner-held financing. There may be some tax benefits using this approach.
  2. Local bank loans. Bank financing is very difficult for a buyer to secure in the small environment, since banks are risk averse. Bank lending is the primary reason for the misconception that lender financing is difficult.
  3. SBA financing through third party lending sources. This is the primary lending source used to fund buyers of small businesses. These lenders are specifically in business for small business lending. Most business buyers do not know of these types of lenders have the contacts to use them successfully.

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Undercapitalized Businesses Can Turn To Pre-Bank Funding When Money Is Tight And Options Are Scarce

Written by allroads. Posted in Funding/Lending

Borrowing money
When a small manufacturer gets a major, million-dollar order, but they don’t have the cash on hand to make the goods because their outstanding invoices won’t be paid for 60 days, where do they turn for quick cash? When an inexperienced restaurant owner hires an under-qualified family member to handle the business’s accounting, and that family member makes a payroll tax error that will cost the business its liquor license unless they pay in full within 30 days, how do they come up with money in a pinch?

Smart Businesses Use Financial Modeling To Anticipate Future Growth

Written by allroads. Posted in Financial Modeling

Financial model on a tablet
Wouldn’t doing business be so much easier if CEOs could see into the future? Unfortunately the closest a business owner or leader will ever come to having a crystal ball is establishing a strong, fact-based financial model. Not only do these models provide CEO’s with the best possible view into their financial future, they are also imperative when attempting to secure additional capital. No banker, loan officer or investor will sit down and have a meaningful discussion with a business owner who doesn’t have a financial plan.

Six Benefits of Using Financial Models

Written by allroads. Posted in Financial Modeling

Gathering around financial planning
A financial model is a set of assumptions about future business conditions that drive projections of a company’s revenue, earnings, cash flows and balance sheet accounts. In practice, we use financial model in a spreadsheet form (usually in Microsoft’s Excel software) to forecast a company’s future financial performance.

New Year’s Resolution for Small Business Owners; Find Innovative Ways to Raise Business Capital

Written by allroads. Posted in Funding/Lending

Counting change for funding business
Are you familiar with the term “pre-bankable”? Many business fall into this category, meaning that either they haven’t been in business long enough to qualify for traditional bank financing, or they can’t qualify because of bank underwriting requirements. It’s no secret that banks have not been a source for small business lending for some time now, and unfortunately, change isn’t just around the corner for many deserving businesses.

Why Did Home Depot Go To Silicon Valley?

Written by Gene Wright. Posted in Gene Wright

Thanks to shows like Shark Tank, the concept of publicly pairing entrepreneurs to investors is now a mainstream concept, piquing the interest of many Americans.

At one time, pitching a new business idea to a group of investors was an alternate option to traditional funding that made raising capital possible for the average entrepreneur. Today, thanks to the democratic nature of the Internet, there are more options and fewer barriers than ever before.