21 Apr Has the Pandemic Created a Historically Unique Opportunity for Buyers?
Unless you’ve been living under a rock, or perhaps a bunker without Internet, television, or radio, you already know that COVID-19 is one for the history books. At the writing of this article, the pandemic is ongoing. But regardless of when this period ends, you can be sure its consequences will be felt for some time to come. In this article, we’ll dive in and explore some of the key points and observations from a recent BizBuySell article entitled, “COVID-19 Stalls Q! Transactions; Presents Once in a Lifetime Opportunity for Acquisitions.”
At first glance, the statistics are jarring. As the BizBuySell article notes, “Over the final 26 day of March, the number of reported sold businesses dipped 43% year-over-year. Whether these deals were delayed or simply not reported as brokers scrambled to put their business plans in place remains to be seen.”
Taking Advantage of Relief Programs and Low Rates
No doubt, COVID-19 has injected some chaos into the system. Now, with that stated, BizBuySell’s point has merit as they point out that now is a “once in a lifetime opportunity for acquisitions.” The pandemic brings with it a range of unique opportunities for buyers, including being able to take advantage of relief programs and low rates. Hidden within all the turmoil are many opportunities.
The BizBuySell article emphasizes that federal programs aimed at supporting businesses provide unique opportunities for buyers. The authors specifically point to the Small Business Administration Debt Relief Program, which is definitely an interesting one.
Considering SBA 7a Loans
As the article states, the SBA will “pay the first six principal and interest payments on behalf of the borrower for SBA 7a loans.” But that is only the beginning, as the payment is a subsidy and not a deferment. Yes, that means there is NO obligation for repayment. Existing 7a loans and new 7a loans closed between March 27th and September 27th, 2020 are eligible. Ultimately, this could be free money. Factoring in the already low interest rates, and now seems like it truly is a once-in-a-lifetime opportunity for buyers. Or as Tony Calvacca, managing partner for the NYBB Group noted, “This is the opportunity of a lifetime for a well-positioned buyer.”
Calvacca advises that buyers should “hyper-negotiate lease terms” as well as other business costs. His reasoning is quite sound, as he points that that landlords don’t want to lose tenants, and they will be more willing to strike a deal. In terms of what that deal could look like, Calvacca believes that it is possible to negotiate multi-year, low costs lease terms.
Negotiating Terms of Leases
In short, now could also be an incredible time to save on leasing costs, as landlords are also worried about their cashflow and will not want to lose a tenant. Remember, finding a new tenant in such an uncertain climate could prove very difficult. From a landlord’s perspective having a tenant has never been quite so important. This does create, yet another, unique opportunity.
The facts of the situation are undeniable. As Matt Coletta, Co-Founder and Managing Partner of M&A Business Advisors, points out, buyers who buy soon will be receive two major benefits. First, they will be able to purchase at a discount. Second, buyers should be able to receive an attractive long-term lease. Put in its proper perspective, buying now could indeed be an incredible opportunity.