Category Archives: Business

Transaction Teams in Business Acquisition and Sales – Finance Company

The tightened credit market and slow economy that the United States has experienced over the last two to three years has caused a modification in the loan criteria for many traditional lenders resulting in a restriction of financing available to fund business acquisitions. Securing financing for the purchase of an established business is one of the most important components of the deal and for many buyers the process in locating the right funding option can be both daunting and challenging. Despite the national economic headlines, there remain a number of acquisition financing sources that are actively lending money for these deals. The size of the business, amount of financing required, business cash flow, quantity-quality-type of assets, business experience, and credit worthiness will all be issues that determine the type of funding as well as the particular financial companies that should be evaluated. SBA financing, with its 7a Loan Program, remains one of the most popular and frequently used vehicles for funding acquisitions. What most entrepreneurs are unaware of is the fact that every financial institution involved with SBA financing will have its own unique and distinct lending criteria. Keep in mind that the SBA is just the loan guarantor not the actual lender. Therefore it is critical for the buyer to speak to a number of financial institutions, or consult an experienced business broker, to determine which sources of capital are available and the most appropriate for the particular business acquisition.

As illustrated above, the finance company that is involved plays a crucial role given that the majority of main street business acquisitions involve 3rd party funding. As a result, a business owner interested in selling the company should recognize the importance of ‘pre-qualifying’ their business for financing. Involving the lender early in the process avoids delays in addition to determining the optimal framework for the transaction financing structure. “Owners seeking to sell who consult 3rd party lenders benefit from becoming well educated on the type of financing and terms that are available, the likely buyer down payment required for the loan and any seller financing commitments that might be required,” commented Steve Mariani, President of Diamond Financial Services. Companies for sale that are distinguished as ‘lender pre-qualified’ will receive a better response, increase its marketability, and often decrease the time required to close the transaction. Prospective business buyers should also pursue a buyer ‘prequalification’ early in the search process as immeasurable benefits can be obtained. Understanding in advance about the value (or price) of a company that they can qualify for will make the buyer a significantly more attractive prospect to both the business broker and the seller. Buyer ‘pre-qual’ letters, while generally available at no cost, often prove to be priceless in the perceived buyer qualification. In summary, both the business seller and the business buyer are strongly encouraged to consult financing companies early in the process so that they have a clear understanding of the types of financing that are available in addition to the terms and conditions for which it would be extended, based upon the specifics of the individual business and participants

Can a Mom ‘N Pop Shop Benefit From a Consultant?

When you think of a business hiring a consultant to devise a strategy for growth, you probably wouldn’t think of the automotive industry.

John Smith is small auto repair shop owner who has been serving the Hittsville community for 20 over years. He makes just enough to provide for his family’s basic needs. John explains, “One of the reasons I went into business for myself was to make more money and spend quality time with my family. But now I’m a business owner I make less money, and spend less time with my family. Something went wrong.”

No matter how hard John seemed to work, nothing seemed to get better. His business was practically bleeding. John’s colleagues, friends and family made suggestions to help increase the bottom line, but none of them had run a profitable business before. Embarrassed to say it, John used some of his family members suggestions to no avail. Last September John was solicited to attend a workshop from a auto repair consulting firm that claimed “Increase Profits with Better Time management!”

To good to be true, he thought. Despite his hesitation John attended the workshop. The consulting firm had over 16 years of expertise in the industry and over 50% of their clients saw an increase in profits.

Great, but what’s the cost? Over $12,000 for 6 months. With no savings and unable to get a loan anywhere John found it almost impossible to grow his business. That’s when John was introduced to Smart Funding Solutions™.

Smart Funding Solutions™ devised a special funding agreement through Consultant Financing. The consultant was paid the fee up front (so he could focus on getting the job done, instead of collecting bills), John was provided with working capital to shift his current business model to one more profitable, and the auto repair shop paid Smart Funding Solutions™ back in installments that worked with John’s increase in profits. Bottom line? John increased his profits by 20% and his consultant re-invested money to grow the consulting firm.

Everybody wins.

Smart Funding Solutions™ partners with management consultants offering full-service, customized financing to small businesses that traditional lenders find “too new” or “too risky.” Smart Funding Solutions™ takes pride in supporting these small businesses and consultant companies while helping stimulate the economy.