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News From Touchstone Business Advisors
From time to time, Touchstone has new business listings, changes to existing listings or important new developments, which are first previewed to those valued clients, who have previously expressed an interest in a business acquisition or sale. If you have a business associate who would be interested in hearing about our services, listings and receiving our articles, please forward this newsletter and they will be able to sign-up for future notices. You can also keep abreast of these changes and download NDA forms and business profiles on our website: www.touchstonebiz.com |
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Make 13% More on the Sale of Your Business...Guaranteed!
In this time of informercials and election promises, everyone needs to sift through the pitch lines, which are designed to grab your attention. There is always "the fine print" that qualifies the offer. If there is a change in the occupying Party in the White House, this offer may in fact prove to be true. If a business owner considers selling their business this year, they could potentially net 13% more now versus next year.
When discussing valuation with sellers, their question is usually "what is my business worth?" Their focus on "the number", rather than terms and tax consequences of the deal structure, is often misplaced. They should consider the more relevant question, "If I sell, how much of the selling price do I get to keep?" Similarly, business buyers should consider this latter question when structuring an offer.
The current capital gains tax rate is at a historic low of 15%. The Democrats are calling for an increase in the capital gains rate to 25%. Simplistically, if you sell a business this year for $500,000, the net after tax is $425,000. With an increase in the capital gains rate to 25%, the same sale price would net you $375,000. $50,000 more after tax equates to 13% more under our current tax structure than you would get to keep with a 25% capital gains tax structure.
The window may be closing on this opportunity for small business owners to avoid a potential 10% or more capital gains tax increase. Historically, the capital gains tax rate has ranged up to 49.875%! In recent years, we have enjoyed a favorable tax structure that has supported small business owners with a rate that does not overly penalize them upon an ownership transition.
Should business owners consider a sale now, rather than next year? Does this pending tax change create opportunities for buyers to capitalize on seller urgency? Maybe...remember that sometimes you pick the timing and sometimes the timing picks you.
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Update on Touchstone Listings:
(see www.touchstonebiz.com for detailed information)
Breckenridge Restaurant/Bar Sold
Commercial Painting Company Sold
Niche Software Company Sold
RV Rental Company Contract $ 275,000
- Stable Revenue Model, Perfect for Pending
the Current Economy
Niche Manufacturing Company Active Negotiable
- Established Products with Patents
Truck Repair/Maintenance Company Active $ 750,000
- Full Service Facility & Mobile Service
Jewelry/Art Retail Store Active $ 275,000
- Great location, Sales Increasing
Day Spa and Salon Active $ 75,000
- Great Value and Upside Opportunity
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"Experience" Required for SBA Loan
Recently, the SBA released new guidelines for lender standard operating procedures (SOPs). One of the changes is increased review of the requirement of the buyer to have direct or transferrable experience in an industry related to the business for which they are seeking an SBA loan. Lenders will have less flexibility to stretch their classification of related experience. For example, some lenders may not consider a loan unless the buyer has direct experience as an owner or manager.
Experience has therefore become a very crucial area that needs to be satisfied before a lender will approve new SBA financing. One way of getting around this strict requirement is for buyers to partner with someone who has direct experience.
An underwriter while viewing a loan package needs to get a true feel that all their criterions are met. Specifically, the underwriter will be considerting: "Is the individual that is attempting to secure the loan qualified to run this business?"
This is answered by the reviewing the applicant's resume, as well as any supporting documentation.
To learn more, contact Touchstone Business Advisors for resources to accomplish your business acquistion goals.
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