I hope this newsletter finds you and your family healthy and well. From a business standpoint, these are challenging times for business owners but also for business buyers (people in need of income).
Many of our newsletters are related to exit strategies and particularly exit timing, and this strange market has actually brought some interesting and counterintuitive opportunities for both buyers and sellers:
- As part of the Cares Act passed on 3/27/2020, borrowers of SBA acquisition loans closed/or funded by 9/27/2020 will have six months of their loan payments (principal and interest) made by the US government! This is an incredible incentive to get buyers to move forward toward closing and alleviates some of the concern about revenue and profit disruption as the economy gets back on its feet.
- We have been told by our banking partners that interim (2020) financials will not be weighed as heavily as the prior 3-5 years of financials and the prospects for 2021.
- Valuation methodologies and conclusions have not changed (yet). In other words, if your business was valued at $500,000 (for example) on 2/28/2020, it is still valued at $500,000 as of this writing. Having said that, this will vary by industry, underlying company fundamentals, and how quickly the company and industry are expected to recover if they were impacted.
What does all this mean?
If you were thinking about exiting/selling your business in 2020, and were "waiting for the smoke to clear" before entering the market place, it may well be prudent to enter the market sooner rather than later and allow your buyer to make use of this provision of the CARES Act -- if your business is a candidate for SBA financing, 6 months of US government paid debt service is a powerful motivator for SBA borrowers.
How do you know if your business is a candidate for SBA financing? Reach out to us and let's discuss your situation. Some, although not all, of our banking partners, are still making SBA acquisition loans and are offering pre-qualifications for good businesses. This is in addition to the Paycheck Protection Program that you may have already tapped into.