It’s Our Job to Set the Seller’s Expectations in Line With Reality

It’s Our Job to Set the Seller’s Expectations in Line With Reality

Comments from Tom West:

If you had any doubt about SBA loans, read the following article. Roger is an “old pro” in his own right, so he knows what he is talking about. Not too long ago there was no such thing as an SBA loan. Oh, they existed but no one wanted to go through what was required, and seller’s weren’t willing to take the business off the market for the time it took to process the loan. And, many times the loans were rejected.


It was not all that long ago, perhaps only 3 or 4 years ago when in every deal we did it seemed to be easy to get an SBA loan. The lenders were competing for loans and sometimes we would see a buyer walk away from closing with a loan for 80% of purchase price and working capital in excess of the down payment. Sometimes they virtually had “no skin in the game”. Boy have things changed.

As we all know that is not the case anymore. While lenders are beginning to make loans again, the credit box is a lot tighter and buyers need to have cash down to do the deal. Life has also changed from the days of sellers walking away with all of their cash to sellers being part of the financing package.

Part of our job as a Professional Advisor is to educate business owners on today’s reality when it comes to selling their business. Most of them are going to tell you that their preference is to sell their business and get 100% of the purchase price up front. Reality is that in today’s world they will often need to finance as much as 50% to 80% of the sale if bank financing is not available. In cases where the business has collateral such as real estate, lenders will be more willing to lend but the seller may still be required to finance 20% or more.

This is often an unpleasant surprise to a business owner who is looking at the proceeds from the sale as a way to finance their retirement. It is our job to make sure that they understand the likely circumstances of a sale before we get into negotiations with a buyer. Too many times brokers will just agree with a business owner who claims they want an all cash deal, knowing that it is unlikely to happen. The path of least resistance is to just agree and take the listing with the idea that you will cross that bridge later on. We owe it to these people as true professionals, to present the real picture, even if it’s not what they want to hear.

We owe it to ourselves, our sellers, and our colleagues to take only listings which are sellable. That requires managing the sellers expectations and keeping them in line with today’s reality. Anything less would make us just another business brokerage company.

 
 
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