What Surprises Business Owners When They Sell Their Business?
Business owners generally know that a broker – similar to a real estate agent – can help them sell their business. Sellers hire them to help market the company, thereby creating competition and better prices.
What surprises sellers is the relationship between a broker and viable buyers. Select a broker who works in your industry and with businesses of your type and size, and you are more likely to obtain the most competition in your sale.
The reason for that is U.S. Small Business Administration (SBA) financing.
“About 99% of business purchase transactions utilize SBA financing,” said Debbie Webber, Vice President and Relationship Manager at Coastal Community Bank. “Often, the transactions utilize the 7(a)-loan program to acquire the business and the 504 program to finance purchasing real estate.”
What does that have to do with a broker? Brokers who serve your industry and business size tend to gather buyers who are interested and capable of running companies of that same size and industry, explained Kara Gibson Brzytwa, Managing Principal at Exit Equity, a business brokerage based in Edmonds, Wash.
What does the buyer pool have to do with SBA financing? SBA has new and increased expectations for lenders, Webber said. SBA mandates lenders ask for the borrower’s (aka the buyer’s) experience in the seller’s business type.
“If the buyer doesn’t have experience, then we have to determine what experience the buyer has in business generally that shows they can run a business in a new industry,” she added. “Without SBA financing, the seller’s list of potential buyers shrinks to the available pool of all-cash acquirers.”
Want to learn how to select the right broker? In our new guide, we’ve gathered the best questions to ask – and tips for each key element in preparing your business for sale.