by David Madison
Happy New Year! We hope that you’ve gotten 2017 off to a good start. We thought that we’d get the year kicked off by identifying some of the ideas and information from last year’s newsletters that seemed to be most appreciated by you, our audience. Our newsletter articles are all archived, and you can easily access them right here from the link over on the right side of this newsletter, and hopefully you’ll find some good reminders that’ll help you through the year.
In February, we discussed SBA Form 1919 and how it was wreaking havoc in all kinds of transactions, especially when it comes to current employees of the business. You can limit the risk of problems here in a number of ways, the most important by making sure the buyer’s business plan doesn’t set off any red flags.
March’s column focused on proper deal structuring. Seller notes take front and center here, and you’ll find lots of great information that’ll help you put together your transactions so that they have the greatest possible opportunity to work for your clients and close.
We talked about buyers in April, specifically how we make sure that they are truly qualified and ready to go so that you and everyone else involved in a transaction are making good use of your time and efforts. If you want to learn how we nail everything down right up front, this is a column you definitely want to check out.
In May, we started a series focused on working successfully with first time business buyers. We identified what a perfect buyer looks like and then how we bridge the gap between the ideal and the reality. Read this article and you’ll learn a number of ways that we help get our borrowers, both first timers and experienced, over the hump and successfully into their new businesses.
June’s column continued our first time buyer series with the focus on writing successful business plans. While targeted to new buyers, you’ll find information that everyone can use, and also very applicable is a big warning for business brokers. Bottom line here is no matter what, do not do your client’s business plan!
In July we covered how buyers can ace their loan underwriter interview. While again targeted towards first time business buyers, there’s great advice for every purchaser and business broker. You’ll read how to set things up in advance for success. And the two key words that all borrowers should remember are “humble confidence”.
Our August column identifies our top five lenders from the prior year, how and why they change from year to year. We also put into a bigger perspective what it is that we can do to help you and other business brokers, and how we see our responsibility to help you succeed and grow your business.
September’s discussion is a must-read as it tells you how to handle earn-outs when the SBA no longer allows them in the deal structure. The ability to reward the seller of a rapidly growth in a business with a sales price that recognizes that growth, while at the same time protect the buyer from that growth not continuing or ever going backwards (the classic one-hit wonder syndrome) is something that you must have in your deal structuring toolbox, and we tell you how to do it.
In October we broaden the discussion about deal structuring and then bring in the lender’s involvement in that process. There’s good lender input and bad lender involvement; we discuss what each is and how to control what you need to control. We then offer a vivid example of how to do it the right way, and how in the process we saved our client not just $28,000 but actually made it possible for him to buy the business when he was just about out of time after a previous lender badly messed up things.
November’s column was all about borrower’s credit and how lenders really looked at credit reports. It’s not just all about credit scores; it’s what’s underneath that builds the scores. When you come right down to it, lenders care most about a borrower’s money management skills. Credit scores don’t always accurately reflect that, but when you understand a borrower’s payment history and combine that with their savings and spending habits, then we can see the full picture.
And then we wrapped up the year in December, with a walk through a successful transaction that started properly with a business and buyer that were both good candidates for SBA financing and a properly structured purchase agreement. We then identified hot spots that meant success or failure and discussed how to successfully navigate them. And then we highlighted some of the things we do to land the closing ship safely and right on schedule.
We hope as you look through some of last year’s articles you find some helpful ideas that you’ll be able to use to make 2017 your most successful year yet!
AskDiamond@easysba.com is always available for specific questions regarding this or other SBA rules.