In this thread, I am going to explain how you can take advantage of the 'Silver Tsunami' in the SMB acquisition space by using a commercial loan broker for the financing process of your SMB acquisition 🧵
➡️ Trillions of dollars of businesses will change hands within the coming decades. Many of you have read threads on this topic from @SMB_Attorney@girdley@Codie_Sanchez & others
2 - Financing the Acquisition
➡️ One of the factors that goes into the process of buying a business is acquisition financing. You have 2 options with this: DIY approach or working with a commercial loan broker.
3 - DIY Approach: Explained
➡️ The "DIY" approach with SMB acquisition financing is very much what it sounds like - contacting lenders on your own to meet them & find one that will be a good fit for your deal.
4 - DIY Approach: Explained (cont.)
➡️ The downside of the DIY approach is 2 fold: 1) It takes substantial time on your part as a searcher & 2) It is difficult to know if you are A) getting the best debt terms, or B) if the bank you are working with is more conservative than SBA
5 - The Benefits of a Loan Broker
➡️ Save Time: Loan brokers (for example @PIONEERCAPADV) know which bank(s) are the best fit for your deal
➡️ Subject matter expertise: Banks may ask for things that aren't hard & fast SBA requirements. Let your loan broker be the 'best cop'
6 - The Benefits of a Loan Broker (cont.)
➡️ Accelerating the underwriting process
➡️ Accelerating the closing process
➡️ Getting your deal in front of the correct bank faster
➡️ Avoiding overly conservative underwriting which can kill your deal
7 - How Does The Loan Broker Get Paid
➡️ At @PIONEERCAPADV, I get paid a % of the loan amount after the loan closes & funds. My fee from the bank does not come from loan proceeds
➡️ Did you know that a significant amount of deal volume at top SBA banks comes from loan brokers?
8 - Downsides of Using a Loan Broker
➡️ If you're working with @PIONEERCAPADV, knowledge will be shared with you that will empower you. Some banks don't like this.
➡️ Specific banks like Wells Fargo don't pay brokers, so I don't currently work with them.
9 - What's the Catch?
➡️ The answer to this question is that there is none.
➡️ I have helped searchers with low 6 figure NW's close on multi-million deals, sometimes with 5% cash down.
➡️ I can save you time in underwriting and closing and avoid overly conservative underwriting
10 - Concluding Thoughts
➡️ If you enjoyed this thread, please feel welcome to RT, comment, or follow me at @PIONEERCAPADV. I tweet about all things relating to business acquisition financing and SBA
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Business acquisitions financed through SBA loans have very specific requirements that need to be followed. In this thread, I will dive into a few such requirements🧵 👇
➡️ As the SBA's guidelines currently stand, if you are buying a business as an external buyer (someone that doesn't currently own equity in one), you are required to completely buyout the seller(s). No exceptions.
2 - Consulting Period for the Seller(s):
➡️ SBA guidelines currently enable a seller to stay on for up to 12 months following the date of the closing of a business acquisition. The terms of the consulting arrangement must be approved by your lender & lender's legal counsel.
I have received emails and DMs on one specific topic so I'm addressing it here to save time on communications. My shared SBA searchers docs folder is now available upon request but will no longer be publicly accessible. 1/x
One specific SBA lender wants to crucify me for sharing their debt service coverage model with searchers that want to pursue the American Dream, so it will no longer be distributed. Instead @PIONEERCAPADV will have a better one that will be far superior. 2/x
If you had the link to the Box drive, don't shoot the messenger. Email or DM me and I'll send you a link and by the end of next week you will have the new and improved spreadsheet as well. Long life the self-funded searcher! 3/3 🦅🗽🇺🇲
➡️ Any 20% or more owner of an applicant business is required by SBA to personally guaranty an SBA loan. No exceptions. 1/x
2 - What Does a Personal Guaranty Mean?
➡️ All of your personal assets are along for the ride on your deal. If your deal goes sideways, the bank essentially can go after everything that you own. 2/x
As year-end approaches, its important to be friendly, respectful and gracious to your deal team partners. Many folks including closers, escrow reps, paralegals, etc. are working late into the evening to make your 'Silver Tsunami' dream happen. 1/x
Often, these folks are not earning overtime. They aren't closing on a multimillion SMB, but are splitting time between your deal, family, and loved ones.
The best way to get your deal the love and attention that it deserves it by being sweet and friendly to them. 2/x
If you were not expecting to close by year-end, this is not the time to make a full court press to pile drive your deal across the 12/31 goal line. Doing so will cause a lot of trouble with the lender, will burn out the closer, and may make them quit! 3/x
➡️ CRE bros pivot into the SMB space as rising interest rates make real estate more costly to buy.
➡️ Sellers factor in higher debt service costs into their valuation expectations for their SMBs. Businesses brought to market close more quickly as a result
➡️ SBA (hopefully) introduces updated buyer friendly guidelines that allow for partial buyouts with rollover seller equity
➡️ The amount of deal flow increases across the SMB space as prospective entrepreneurs catch wind of the Silver Tsunami 2/x
➡️ High quality threads and easy to digest content about options for structuring SMB deals encourages searchers to closely weigh any and all options for both debt & equity
➡️ More banks enter the large deal parri passu space, providing more options to searchers with large deals