Generally there are two forms of financing for the sale of a business, an SBA loan, a Seller Note or many cases both. While every business owner’s dream is to sell their business for “cash”, few transactions are for all cash other than for very small businesses. With that said, is it possible to get all cash at closing for the sale of your business? If it qualifies for SBA financing the answer is yes.
We love SBA financing for a number of reasons, first and foremost the SBA will finance up to 90% of the business acquisition (if it qualifies). This means a buyer can purchase a business for 10% down and finance the rest over 10 years at prime + 2.75%. With a 10 year term and low interest rates this improves the cash flow for the buyer making the business very attractive for prospective buyers. The low down payment of just 10% also opens pool of prospective buyers to many more buyers.
As an example, a buyer purchasing a business for $1,000,000 would be able to buy it with just $100,000 down and the seller would get $1,000,000 at closing (less closing costs). In many cases the SBA lender may require the seller to carry a small seller note of 10% of the transaction value resulting in the seller receiving 90% of the transaction value at closing (less closing costs).
This type of financing structure puts the business within reach of more buyers and makes it much more attractive than businesses with no SBA financing.
We work with a number of SBA PLP (Preferred Lender Program) lenders, Call 949-200-6350 to get your business pre-qualified for SBA financing!
Every seller naturally wants a cash deal, to walk away with no worries and a fat bank account. This is a nice dream, but not reality other than for extremely small transactions. There are a number of reasons this seldom happens.