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From the category archives: Certified Business Brokers News

Don't you wish financing a business could be easy? Well, keep these important tips and tools handy to have a smooth buying experience.

Buy a Business Using Retirement Funds

Put your money to work! Invest it in your own business and let your money work for you! You can use cash from your 401(k) or IRA account to purchase a business without incurring early distribution penalties, with no taxes, no loan repayment, and no hassle. For example, a Texas resident using $100,000 from a qualified retirement fund can keep the extra 31% that would have been paid in taxes, leaving an additional $31,000 to fund the new business by adopting a transfer trust plan versus withdrawing the funds outright. With the adoption of a pension transfer trust, you are allowed to convert 401(k) and IRA funds into privately-held stock in your new business. Pension and tax advisors can provide all the specific components necessary to make sure the transaction is in compliance with all applicable IRS Code Sections, ERISA Law, and Department of Labor Letter Rulings. We can refer you to a reputable representative. For more complete information on using qualified retirement funds to purchase a business, ...

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Friends and Family: A Financing Option for Buying a Business

The first job facing many prospective business owners is rounding up the cash necessary to make the purchase. They may find that banks have made borrowing difficult (or all but impossible), and that even SBA loans have requirements too stringent to meet. One viable option is obtaining financing from the seller; another is to seek help from family and friends. Borrowing money from family members and/or friends is one of the most frequently-used methods of small business financing. The pluses are obvious--there is trust, familiarity, and a general comfort level when dealing with those you know. The drawbacks are self-evident as well: "doing business" with family and friends comes with cautionary notes of legendary proportions. Everybody knows that family ventures can be complex and stressful, stirring up "bad blood" and lingering ill will. However, by taking the right preventive steps, buyers can take advantage of friendly financial help. 1. Set up an informal meeting to introduce your ideas. This is t ...

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SBA Legislation Special Update

Extension of SBA Recovery Lending Programs Will Support $1.8 Billion in Small Business Lending Agency plans to restart Recovery loan approvals on March 10 WASHINGTON – President Barack Obama signed legislation Tuesday extending until March 28 the U.S. Small Business Administration’s ability to provide small business loans that are enhanced with special provisions of the American Recovery and Reinvestment Act (ARRA), including a higher guarantee of SBA-backed loans and a waiver of loan fees normally paid by borrowers. SBA estimates the additional funding will support about $1.8 billion in small business lending. New approvals of eligible loans with the higher guarantee and reduced fees made possible by the Recovery Act are expected to resume on March 10. Loan applications from borrowers in SBA’s Recovery Loan Queue will be funded first, followed by new loan applications. “These key loan programs have been successful in helping jump-start the economic recovery for America& ...

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SBA Update - What's Happening in Congress

On Thursday December 10th, Sens. Landrieu and Snowe introduced S. 2869, the Small Business Job Creation and Access to Capital Act. This new bill contains a series of measures that were separately introduced by Sens. Landrieu and Snowe earlier this year. The Senate Small Business Committee will mark up S. 2869 Thursday, December 17th. Highlights of the legislation include: Increase the loan limit on 7(a) loans from $2 million to $5 million. Increase the loan limit on 504 loans from $1.5 million to $5.5 million. Increase the loan limit on microloans from $35,000 to $50,000. Allow the 504 loan program to refinance short-term commercial real estate debt into, long-term, fixed rate loans. Extend the authorization to provide 90 percent guarantees on 7(a) loans and fee elimination for borrowers on 7(a) and 504 loans through December 31, 2010. Direct the SBA to create a website where small businesses can identify lenders in their communities. Increases the maximum guaran ...

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Retirement Funds Can Finance A Business Acquisition

Qualified retirement accounts such as 401(k), 403(b), Pension, Profit Sharing, and IRA rollovers can put you on the path to business ownership. You can also use these funds to buy a business with no taxes, no penalties, no loan repayment and no hassle. Qualified money is money with a tax beneficial wrapper around it because it was accumulated in a tax-benefited plan. Many people have been building retirement accounts with much of their money in qualified retirement vehicles. If these accounts are improperly accessed (unwrapped"), they stand to be hit with up to a 50% tax penalty in state and federal income taxes, depending on tax bracket and state of residence. So, the question to be answered is, "How can a person access their retirement funds to purchase a business without paying a penalty or income tax?" There are three primary ways to gain access to "qualified" retirement funds for use in a business acquisition WITHOUT incurring penalties and taxes. 1) Self-Directed IRA This option essentially ...

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The Five C's of Credit Analysis for Getting a Loan for Buying a Business

If you are buying a business and plan to obtain financing from a lending institution, these five tips provided by Adeline Rem, Regional Vice President of Celtic Bank, will be helpful in getting your loan approved. 1. Capacity The capacity of the borrower to repay is the most critical of the five factors. The prospective lender will want to know exactly how you intend to repay the loan. The lender will consider the cash flow from the business, the timing of the repayment, and the probability of successful repayment of the loan. Payment history on existing credit relationships -- personal or commercial -- is considered an indicator of future payment performance. Prospective lenders also will want to know about your contingent sources of repayment. 2. Capital Capital is the money you personally have invested in the business and is an indication of how much you have at risk should the business fail. Prospective lenders and investors will expect you to have contributed from your own assets and to ...

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SBA Loans for Small Business Acquisitions Improving

The Small Business Administration today announced their support of the Federal Reserve Bank of New York and the Treasury Department to improve the TALF Program, which will help unclog the secondary market for asset-backed securities, including SBA 7(a) backed loans which is the vehicle used for small business acquisitions. “We are pleased that terms for SBA loans are continuing to improve, and TALF is moving into the implementation stage where loans will be made,” said SBA Acting Administrator Darryl K. Hairston. “SBA welcomes the recent announcement from TALF and supports its continued efforts to modify the terms to help unfreeze the secondary market for SBA loans, thus making it easier for our lending partners to make new loans to America’s small businesses.” “Three specific changes should be especially helpful to the secondary market for SBA loans. The lower collateral requirements for pools with longer expected lives; the creation of a federal funds-based rate; ...

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Private Equity Groups are Hunting for Business Acquisitions

Private Equity Groups have excess capital to invest and are looking for business acquisitions. One of the major market shifts for the acquisition of privately-held companies has been the growth in the number of Private Equity Groups (PEGs) over the last decade, they number in the thousands. PEGs have become key players in business acquisitions. They offer flexibility as a liquidity source, giving entrepreneurs the ability to take some cash off the table, recapitalize their company or simply sell and move on. Private equity refers to buyout groups that seek to acquire ongoing, profitable businesses that demonstrate growth potential. The private equity market had traditionally been restricted to acquiring larger companies. But increased competition for those larger operations, the greater growth potential of smaller firms, and an easier path to exiting the investment of smaller firms in the future have played a role in attracting PEGs to smaller companies. PEGs are typically organized as limit ...

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Buying or Selling a Business During Tough Times

With negative economic news grabbing the headlines in the United States, business owners may think it is not a good time to sell their company. But fortunately for owners looking to sell, that is not necessarily true. Business sales are still taking place with sellers capturing attractive prices and favorable terms, when the deal is structured properly. One of the the most important foundations of constructing a successful deal has always been a solid buyer, one that is creditworthy. Whether it is an individual, another company, or a Private Equity Group, qualifying criteria are demonstrated business acumen, significant assets to pledge as collateral, or a committed fund behind them. With a proven, credible buyer at the negotiating table, lenders are more likely to support the transaction. In today's environment, some seller financing should be expected to get the deal done. It is not uncommon during a tight economy that sellers must share the risks with the buyer and the lender in order to achieve ...

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Credit Crunch and SBA Lending for Small Business Acquisitions

Despite the current credit crunch, well capitalized community banks still have money to lend for business acquisitions. The SBA 7(a) loan program is an excellent way for both bank and borrower to tread through this troubled business environment. While many large financial institutions are licking their wounds from the mortgage mess and the credit market contraction, community banks who are well capitalized and who traditionally don’t participate in these arenas are still a viable source of funds for small business acquisitions. Because SBA loans have features that reduce risk for banks, they are a valued tool for banks in this environment. And because they offer lower down payments and longer terms, the resulting lower monthly payments are attractive to borrowers. The US Small Business Administration (SBA) enables private lenders to make loans that they ordinarily would not be able to make by guaranteeing that a portion of the loan proceeds will be repaid to the lender in the event of a default ...

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