Selling your business is never an easy decision. From deciding on an asking price to finding the right buyer, the process of listing your business for sale can take months. This is why it comes as no surprise that only around 30% – 40% of businesses listed for sale each year will actually ever sell. Does this surprise you?
Wouldn’t it be nice to give your business a competitive edge that can promote a quicker sale? The good news is that business brokers who are willing to go the extra mile and support an SBA pre-qualification can give your business the advantage needed to avoid becoming a part of that statistic.
What Does SBA Pre-Qualification Mean?
SBA pre-qualification means that a lender backed by the SBA has analyzed your business and has determined that a business loan is attainable to fund the purchase. Your business will need to show supporting documentation, such as past tax returns, current financials, and debt schedules, along with submitting an application to gain pre-qualification.
Once an SBA lender reviews all of these items, they will issue your business a pre-qualification for a set purchase price. Keep in mind that the pre-qualification isn’t the price you need to list your business at as many prospective business owners will bridge the gap with additional cash contributions.
Why is it Beneficial When Selling a Business?
Many business purchases are funded by an SBA loan. By gaining pre-qualification before your business hits the market, you are more likely to draw attention to your business as you have removed a major barrier. Traditional SBA loans come with a longer payback period, usually between 7 to 10 years, giving prospective buyers peace of mind that they won’t need to come up with a significant amount of capital to purchase your business. Instead, they will only need to put 10% – 25% down.
In addition, SBA loans have flexible terms that appeal to even novice investors, such as using retirement savings for down payments, the acceptance of credit below 650, and favorable interest rates. When your business listing clearly states that you are SBA pre-qualified, prospective buyers will start thinking of the possibilities of purchasing your business instead of focusing on how they will fund the purchase.
What Role Does a Business Broker Play?
Business brokers play a vital role in helping your business effectively market your pre-qualification. Many brokers are unwilling to go the extra mile and promote obtaining SBA pre-qualification despite the mounting advantages it has for business owners looking to make a quick and profitable sale.
Since many business brokers neglect to properly advise their clients on the importance of SBA pre-qualification, your business listing should clearly display your pre-qualification information to set you apart from other businesses for sale. A qualified business broker will understand this and put in the extra time to differentiate your listing to attract more views and gather more offers with the ultimate goal of selling your business timely.
SBA pre-qualification is an area of selling your business that you might have never heard of. If you currently have a business broker and this is the case, consider searching around for a new broker that is willing to put in the extra work for your business. For more information or to schedule a consultation with one of our brokers, reach out today.