➡️ Up-to-date financials for the target business being acquired
➡️ Corporate documentation for your business entity
➡️ Upd-to-date personal financial statement & last 3 yrs of personal tax returns for any 20% or more owner in the buyer group
2/x: Have a "Quarterback" for your ownership group
➡️ If you have multiple owners in your ownership group, there needs to be a "quarterback" point for communication with the bank
➡️ The quarterback responds to emails for the ownership group and helps streamline communications
3/x: Have a deal team experienced in SBA financing
➡️ M&A attorney that has done deals before in the small to medium sized business space
➡️ QofE provider that is responsive & works with your time-frame
➡️ Life & business insurance agent familiar with SBA requirements
4/x: Responsive Seller that will work with you
➡️ There are documents that a seller will be required to provide & sign as part of the SBA loan process. Pushback on any of these items wastes valuable time.
➡️ Tthere is also a business valuation that requires seller communication
5/x: Have a Business Plan & Projection
➡️ These both take time. I get it. If you have a lackluster version of either, your loan request won't be on the "bullet train" through underwriting
➡️ You can hire someone to draft both if you need the help for either
6/x: Be Ready for "9 Innings in the Ring"
➡️ Every bank is fundamentally different
➡️ No 2 underwriters are alike
➡️ Depending on the bank that you're working with you might be asked the same questions multiple times. Be prepared & be patient.
7/x: Have a plan if the loan approval comes after your LOI expiration date
➡️ Banks aren't perfect unfortunately
➡️ They might drop the ball on you and delay the approval on your deal
➡️ Set expectations accordingly with your seller and use the bank as the "bad cop" if needed
I hope that you found this thread useful.
I tweet about all things related to SBA lending as well as pertaining to business acquisitions.
Please feel welcome to re-Tweet if you found this thread helpful.
➡️ In May, the SBA dropped a document called a Procedural Notice that has fundamentally changed the landscape in SBA lending
➡️ Partial changes of ownership are now the rage as they should be. If your seller is going to help you grow the business, why not have them be your… twitter.com/i/web/status/1…
➡️ But there is one thing that few are talking about — unless you’re closely following my posts
➡️ Enter the 24 month seller note
➡️ Last year I started tweeting about the @FullStandbyHat and it got some attention on SMB Twitter
➡️ While the Full Standby Seller note is still a dynamic tool and one that I’m a big proponent of, the 24 month seller note is even more explosive 🧨
➡️ In this thread, I’m going to break down the details of what the 24 month seller note is, how it works, and why you would be… twitter.com/i/web/status/1…
I’m planning to help sponsors from across SMB Twitter close at least $50 million in SBA 7(a) loan facilities this year
I will do this by working 60 to 80 hours a week including some weekends, and being available on weekends to take calls on deals going under LOI
While I totally understand that this isn’t a lifestyle that folks across the space endorse, it’s how I will help the clients or @PIONEERCAPADV achieve the American Dream of business ownership
If you have a deal going under LOI and there is a mutual fit to work together, please feel welcome to reach out via DM, email to matthias.smith@pioneercapitalarvisory.com or via text to my cell - 608.421.2750
One thing that people don’t necessarily understand about working with an SBA loan broker is that in effectively free to work with
I’m honestly an open book
On Zoom calls with prospective clients, I have screen shared sections from referral agreements before
Lots of the time when I’m speaking with someone they think there is a catch — there isn’t
I have several deals on underwriting now where the sponsor is getting Prime + 1% fixed for 5 years with more conservative debt and equity structures
I have other deals where the sponsor is utilizing the Full Standby seller note structure and/or the 24 month seller holdback note structure for part or all of their down payment, and the interest rate is Prime + 2.75% or Prime + 3%
I had a consulting call today with someone we will call Bob.
Bob is on the sell-side of an SBA financed acquisition.
ABC bank is lending to Bob's buyer.
ABC bank is a preferred SBA lender but is choosing to put the loan through the SBA's general processing channel. 1/x
Banks like bank ABC should be sticking to conventional lending instead of doing SBA.
There is risk involved in any SBA financing transaction, including acquisitions. 2/x
If you are stuck with a bank like Bank ABC and want to connect to discuss alternative options, please feel welcome to DM me or email me at matthias.smith@pioneercapitaladvisory.com if you want to connect. 3/3
This is a real story and unfortunately is not atypical.
I spoke with a searcher today that has spoken with multiple local banks that "did SBA lending."
The bank insisted on the searcher's spouse providing a personal guarantee on the deal. 1/x
Refresher:
SBA requires a personal guarantee from someone when they:
1. Own 20% or more of the applicant business 2. Own equity in a property being pledged as collateral (typically here a limited personal guarantee is sought- not unlimited). 2/x
It was the bank's position that if the buyer's spouse was not "on board" with doing a deal, the bank shouldn't lend on the deal.
This is when @PIONEERCAPADV throws in the B.S. towel and helps you find a new lender.