Not All Business Types Are Created Equal In The Eyes Of SBA Business Acquisition Lenders
Buying or Selling A Business? Is It SBA Financeable?
There is a general misconception in the small-business acquisition marketplace that a person could easily purchase any type of business through the SBA with a low down payment and get a loan for the rest. Most people also believe that SBA loans are a major source of small business financing. But data shows that SBA-guaranteed loans make up a small portion of the value of the overall small business lending market.
Also not well-understood, is that in the eyes of the SBA, not all business types are created equal. Some categories of small to medium size businesses are more likely to receive SBA loans than others. In this article is a rating of business types in alphabetical order and their likelihood to receive loan approval.
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Ideal National Mechanical Corporation
With offices in Austin and San Antonio, Ideal Mechanical ("the Company") has been serving the Central Texas area since 1980 providing HVAC systems design and installation for new and renovation construction projects. The Company's clients are General Contractors and Principal Owners with projects that are public and institutional in nature, such as schools, office buildings, and shopping centers. After a few decades of operating the business, the owner, Jay Gleitman, was ready to retire.
The Company was acquired by Low Carbon Technologies International Inc. ("LCTI"), a Houston company, which focuses on the acquisition of legacy-owned profitable operating businesses in several industry sectors, one of which is the construction and energy efficiency industry. Gleitman, the former owner, will be working with LCTI for a few years to transition the enterprise to new management.
Jim Pringle listed and sold the business.
Advantage Asset Management
|Pictured left to right: Ron Consolino (CBB Broker), Cody Hampshire (Buyer), Debbie & Eric Yeargain (Sellers)|
Eric and Debbie Yeargain, wanting to concentrate on their real estate brokerage company and their office building project under development in The Woodlands, decided it was time to let go of their property management company that they started in 2006.
The buyers, Cody and Brittney (not pictured) Hampshire, had been active in the real estate home rental market for quite some time as investors, but wanted to dive full time, hands-on into real estate in the North Houston area, in which Advantage Asset Mangement was operating. This business was only the second one they looked at and knew it was the one. It took several months to close the deal while they went through the financing process.
Ron Consolino listed and sold the business.
Ask The Experts
Can I take over the lease when I buy a business? Or, do I have to get a new lease?
The lease is an important part of the buying process. The buyer should carefully check the lease terms to determine the rent, the remaining term of the lease, options to renew. If the buyer plans to take over the existing lease, he/she should make sure that the current lease allows an assignment of the lease to a buyer of the business, or if it doesn't, that he/she gets the approval of the landlord to get a new lease.
In most cases it becomes necessary for the buyer to prepare an application and submit it to the landlord. With the application, the landlord will determine whether the proposed buyer is creditworthy and has the financial resources to carry on the business and pay the rent on the lease. If the lease does not have the clause, "approval may not be unreasonably withheld," the landlord has wide discretion to turn down the buyer and thereby cancel the deal. No buyer would want to buy a business without having the approval of the landlord to take over the lease......which is why all deals are contingent upon obtaining one.