SBA Loan Update: Frequently, I am going to try and blog about some of the calls/emails my office gets on the topic of SBA loans for business purchases. Hopefully this educates future business buyers/borrowers, brokers, agents, and business owners realize what works and what doesn't utilizing financing to purchase a small to mid-sized business.
Business Purchase Financing Calls/Emails - Some Recent Examples: Situation: "
Selling price with an adjusted net multiple of 7.5X"
My Response: Sorry this is just another case of business owner who is asking too much for their business. Lenders have limits on what a business should be priced at and usually a 3.5 to 4 times multiple is the most they will accept. In fact most lenders with send the deal out for a business valuation, and if the price is too high they will either not do the deal or the owner will have to carry back the difference between the inflated price and the "realistic" price. Getting the price of the business correct along with the deal structure is critical in getting approved for SBA loan financing.
Situation: "
Tax returns very different from the financials"
My Response: Yes I know the tax returns will be different than financials but there should be some type of correlation and in this instance there wasn't or at least the borrower, agent, and owner had a "difficult" time explaining the differences. Most of the time the difference comes from the fact that the owner is keeping two sets of books and is not reporting income. In my consulting, I always get approached for financing with financials, but I always ask for the tax returns since I know if the tax returns don't measure up & the lenders aren't going to finance the deal.•
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