Business Financing Options Strongly Influence Business Valuation

While every business owner would like to receive full value for their business in cash, it is an unrealistic expectation. As part of the Market Valuation Assessment, the business owner is presented with a range of financing options and shown how these will influence the anticipated selling price. A cash buyer anticipates a significant discount that can be avoided by arranging commercial financing.

We work closely with buyers and sellers to arrange the most favorable financing. Small Business Administration (SBA) loans are the preferred alternative for most qualified transactions. By providing guidance through this process, we increase the both the purchasing power and quantity of qualified buyers. This increases the net sale proceeds to business owners and allows the buyers to leverage their down-payment. Our recommendation for business owners is to elect to have a third party valuation performed.

Documents Required for SBA Approval

From the Business Buyer

• Detailed Business Plan including, but not limited to the following:
  - History and/or description of the business, as well as, a discussion of the market, competition, and any other significant factors.
  - Resume for management, including education and work experience.
• Personal financial statement SBA- 413
• A statement of financial need, reflecting how the business will use its equity and the loan proceeds.
• A detailed projection of earnings (Profit and Loss Statement) for the first year of business operation.
• A list of the collateral to be offered as security for the loan with an estimate of the current market value of each item, as well as, the balance of any existing liens.

From the Business Seller

• A signed and dated historical financial information; Balance Sheet and Profit and Loss Statements for the last three years or since the business was established, if less than three years. Federal income tax returns are acceptable, if historical financial statements are not available.
• A signed and dated Balance Sheet and Profit and Loss Statement no more than 90 days old, with an aging of accounts receivable, payable, and schedule of note balances as of the date of the Balance Sheet

For smaller transactions, the SBA offers a “Low-Doc” Program (Scroll down to "Low Doc" section) with a streamlined application procedure.

See if you might pre-qualify for an SBA loan.