WSS: Bruce, I want to submit an LOI

Ok, so you have done a deep dive on the company, have their last 3 years tax returns and of course at least 12 months of financial statements so you can see what the working capital needs of the business are, correct?

Well 🙄 On average, I have about 10 new Searcher calls a week. Many of them start with the line, I have a company I am interested in and expect to submit an LOI this week.

I want to go over the deal with you to make sure it pencils.

WSS: Bruce, I have an LOI executed for $4,900,000 and need your help. I was going to reach out earlier but I got blindsided by the rate from another Lender.

Now I am in jeopardy of losing my deal because they could not deliver in time.

Can you help? So this Searcher reached out to me on 12/11/2023 somewhat frantic because the Lender he had been working with hadn't even supplied a Term Sheet after 2 months.

He informed me he was referred to this Lender by a referral partner and the rate was below Prime and fixed.

WSS: The first Letter in SBA stands for Small. When I made my very first SBA Loan years ago, the maximum loan amount was $500,000. Today it is $5,000,000.

When I look at my 3 most recent transactions, the purchase price of each has exceeded $12,000,000.

Are these small? So in this post, I want to share with you how to get a deal this size done. As I always tell me potential clients, when you have a willing seller, a willing buyer and a willing lender, then we can structure a deal to make it work!

WSS: I have an executed LOI for $2,500,000. I am speaking with a few Lenders BUT have several requirements to get this deal over the goal line.

These are:

I want to invest only 2.5%
I need to close in 60 days
Working capital will exceed my equity injection

Interested ? I was introduced to a Searcher while visiting out of town. When we sat down, we exchanged pleasantries and then got right down to business. He was quick to mention that he had already spoken with 2 other Lenders and was expecting Term Sheets from both. I then asked him this:

WSS: Bruce, I'm a searcher looking to buy a business. I don't have that much in the form of assets and I don't have much capital to invest

I heard I may not be able to get SBA financing as a result because my PFS is weak

Is that true?

Here's the 5 most asked questions I get 🔹 Question #1 - How relevant is the strength of my Personal Financial Statement (PFS) when it comes to SBA Financing?

As most of you know who have been following me, I am always the first to tell you, each bank looks at things differently and each bank interprets

New WSS: My partner and I submitted an IOI on a business we had interest in buying.

As a result, our broker and selling broker set up a meeting with the seller.

It was our chance to "walk the business" and meet with the seller in person.

Curious how it went?

Well read here! So we submitted this IOI for $3,600,000 on a somewhat interesting business. Everyone knows in this space you have to get many "at bats" to perfect your skill.

It gets easier the more you do it.

So we set up this meeting for after hours because the "employees" don't know

WSS: Bruce, Can we talk about the elements of an LOI and some of the language that is included?

I want to better understand exactly what needs to be in there so it is a meaningful LOI.

Can you provide a draft for me as well?

Ok, let’s dive in 🤿 I just spent the last three days at @Sam_Rosati Searchfund Bootcamp and the big take away was working capital and the negotiated amount inside an LOI.

As a result, I thought I would breakdown a few elements of the LOI and why working capital is such an important number.

WSS: Here's how to turn $30,000 to over $3,250,000 in 10 years. This is from a deal we recently closed.

As a result, I wanted to share with those just how much wealth can be created my purchasing a successful small business.

Obviously, this is why "search" is so popular! Why is "Search" the key word now and Colleges and Universities teaching this through ETA (Entrepreneurship Through Acquisition)

Simply put, it's the best way for folks to create wealth.

Yes, it takes all of what can be said on this platform. It takes everything you can say!

WSS: I lost a $7,850,000 Pari Passu deal in closing after spending 6 months to get it there.

This was an acquisition of a well established existing franchise.

I thought I would share why and share some important factors to consider when looking to buy a franchise concept. So these buyers reached out to me. I knew one of the principals very well. This was right at the beginning of this year. They were in negotiations to purchase an existing franchise (no, I cannot disclose it by name but it had nothing to do with food or entertainment)

WSS: Bruce, I need your help in structuring this acquisition transaction.

I would like to submit an LOI for $2,250,000

I want to also own 100% and do not want to bring in outside investors and dilute my ownership

But, I don't have much liquid cash to invest

Any ideas? So this Searcher set up a Teams Video call to discuss a business he wished to purchase. He planned on submitting an LOI for $2,250,000.

This did not include the full working capital needed to properly operate the business, nor deal fees.

We then had to account for this.

WSS: I just signed an LOI for $7,000,000 for a great company in a great industry

I have very little money of my own but have investors that will back me

I am under 30 but believe that I am the right operator and want to know if you will lend me the money to buy this business? So this Searcher requested a Teams Video call with me to talk about an acquisition he just got under contract. The purchase price was $7,000,000 and he knew he would need a Pari Passu Strip to complete the transaction.

The transaction required $500,000 in working capital.

WSS: Bruce, I have received your banks commitment letter for my $4,100,000 acquisition transaction.

Can you set the expectations around timing and what is needed to get this deal to the closing table?

Of course!

Here's what you need to know about closing an SBA Loan: So this Searcher reached out and asked if I could do his deal. Quick answer was yes and that's exactly what will happen!

Folks always ask, "what does your process look like?"

Here is my response:

Once I receive your "complete" loan request package, with everything I need:

WSS: Bruce, I want to submit an LOI for $5,000,000 on this business

Can I review this deal with you to see if this is something your bank might finance?

Of course you can.

BUT, tell me what you are basing this on and... So this Searcher sent me an e-mail requesting a video call to discuss a deal he was very interested in.

He sent me his "teaser", his resume and a PFS

We exchanged introductions and then got into the deal dynamics.

He really liked the business and wanted to submit an LOI.

WSS: Bruce, I have already worked out the terms and conditions on this $4,200,000 acquisition of a Web Design and SEO Agency

One of the conditions is a 3-year Non Compete Clause

I'm fine with this, but wanted to make sure the Bank was as well

What say you SMBTwitter ? So these 2 business partners called me to discuss their pending transaction. I remember being in Las Vegas sitting in the conference section of Caesars Palace at the Multi-Franchise Show.

The partners told me they had a pretty complete package and that the SPA was also drafted.

WSS: Bruce, I have executed an LOI to purchase a business for $6,400,000

I believe I’m the right buyer BUT my personal net worth is less than $100,000

Can I get an SBA loan to acquire this business?

So, what do you think ? So this Searcher was referred to me and he reached out to discuss his pending transaction. He was starting his due diligence on a telecommunications company that he wished to purchase.

He explained that he was a self-funded Searcher and that he would be raising equity.

WSS: Bruce, I have an executed LOI to purchase a small manufacturing business for $3,385,000

I want to use some money from my 401(k) plan to fund the equity injection or 10% required.

I heard that one can do this, correct?

Yes, but there are some important factors to consider! A Searcher reached out to me a few months ago after we had our initial meeting to let me know he successfully negotiated an LOI

He was quick to tell me that this was a self-funded transaction and that he would be using money from his 401K Plan to inject the 10% required equity

WSS: Bruce, I’m interested in buying this business for $3,500,000

Sales were 30% higher in 2022 vs. 2021

How does a lender look at this?

Can I get SBA Financing for a high growth company?

Here's what you need to know: So this Searcher reaches out to me to inquire about a business they are interested in making an offer on.

He is concerned because sales were 30% higher in 2022 vs. 2021

Obviously, cash flow looks a lot different as well because the deal pencils out in 2022 BUT NOT 2021.

WSS: Bruce, I want to purchase this business for $4,000,000

I only have $75,000 in total liquidity. As a result, I will be bringing in several "Minority Owners" and raising equity

What do I need from them?

What information do they need to provide?

well read here and find out So a Searcher reached out this past week to discuss his pending transaction

He wanted to know, first and foremost, whether he would qualify as the "guarantor" with only $75,000 in total personal liquidity.

I assured him that based on his background, experience and schooling

WSS: Bruce, I am looking to acquire this business for $3,700,000

I heard I might be able to do so without putting any money into the deal

Is that true?

YES !

Really: So this Buyer sets up a call with me to discuss a target acquisition.

He explains that he has an existing small business and would like to expand through an acquisition

He and the seller have agreed on a purchase price of $3,700,000.

A Searcher from here on Twitter just lost a large transaction during Due Diligence

I wanted to share this story and provide some real insight

If you are serious about acquiring an SMB in 2023

This is one WSS you don’t want to skip!
🧵 So the story goes that a searcher submitted in IOI based on $1.6 million in EBITDA represented in the CIM by the investment bankers bringing the deal to market.

After a few negotiation sessions, and further diligence of the EBITDA,

How does a Lender judge whether you understand the business you are purchasing?

by reading your business plan and looking at how detailed your projections are when you take over the business.

for those that know me, know I have lots of quotes. This one is important! “When you are presenting yourself, never misrepresent the goods”

another words, when you are requesting a loan, please put in the time and effort to present a really good business plan and thoroughly thought out projections with assumptions.