Financing for Buying a Business

Thinking About Acquiring a Business Using Financing?

Financing is a great way to acquire a business because you can spread payments out over time.

Financing may be an option for you, if you do not have enough liquid cash to acquire a business that you want.

The pool of home buyers would be minimal if there was no home lending.

For example, you can acquire a $1mm business with $200,000 down.

Buying a Business becomes much more feasible and possible with a loan.

Our lenders are top notch and it’s an easy process to get pre-qualified.

How Financing Affects Cash Flow

With our financing lenders and partners you can acquire a business with 20% or in some cases, 10% down.

This allows you to open the doors on what type of business you can acquire. Which will often reflect in terms of cash flow.

A $1mm business might have cash flow of $300k. Whereas a Business of $200k might have cash flow of $70k.

You’re putting the same amount down. But the end result is staggering in terms of the net cash you’ll walk away with.

In 10 years that $200k business might give you $700k net profit.

In 10 years that $1mm business might net you $1.9mm all things considering.

That is a staggering difference and it cost you the same amount on the day of closing.

Financing allows you to leverage a 5x profile.

How to Work With Us

We help guide you to the right business as a buyer. Value is in the numbers, but also in the intangibles. Of course, the multiple has to work, but we look for unique intangibles that suggest there is value beyond what is in the numbers that other PE firms are looking at. We want value, meaning the proper multiple but also the right fit, meaning it was the right owner and the right fundamentals before you are the successor.

We look for an industry and fundamentals that align with your core competency. We look for companies that would potentially be appropriate fits for you if the logistics and financials are synonymous with your target acquisition criteria.

Example Target Criteria would be as follows.

• Asking Price: What price range do you want based on what you feel comfortable with? Financing allows you to put 10%-20% down instead of 100% down.
• Revenue range: While this may seem irrelevant You’re not going to pick a business you can’t handle.
• EBITDA range: Ultimately, this is the biggest metric most folks look for. What’s the net takeaway after everything is said and done.
• Industry: Is there a specific domain you are looking in. If you’re highly experienced in manufacturing for instance, you probably don’t want to focus on acquiring a business that is heavy in software application.
• Location: Does the business have to be in a specific city or state or are you looking for a national business or an online remote business.
• Brick and mortar presence: Are you looking for a physical stores and/or locations, or are you looking for a business that is 100% online or remote.
• Employees: How big is the company that you want to take over?
• Licensing Requirements: Do you have licenses and are you looking for a business with a license.
• Existing Contracts such as Lease Requirements: Is the business locked in to a lease or space that you need to assume or take possession of.
• Financing: Are you looking for an all cash deal or looking for a lender. SBA approved or non-conventional financing. We have connections with lenders.
• Etc.

Work with us to secure your next company, and learn about our financing options.

Here Is What We Need From You

Here is what we need from you to start the financing process, to start the initial underwriting:

1. Last three years personal and business tax returns (if you have business returns) 19,20,21
2. Personal Financial Statement (attached)
3. Myfico credit report – Need the full report in order to run a DTI on you
4. Short resume on experience

Retain Us for Your Acquisition

Financing Examples Enclosed

Attached are several scenarios relating to financing.

This way you can see what the payments look like.

As you can see the cash flow of the business should in most cases

What is a SBA 7(a) Loan?

The SBA 7(a) Loan is a government backed program that assists buyers of businesses.

Borrowers can borrow up to $5 million through the program, with repayment terms of up to 25 years.

SBA 7(a) loans are attractive to small businesses because they offer high leverage and fixed-rate terms. Additionally, 7(a) loans are non-recourse, meaning that the small business owner is not personally liable for the loan.

What Down Payment is Required?

Business acquisitions can be financed up to 90% by a lender. 10% down oe 20% down are common scenarios in a business acquisition when you and the business you are seeking is qualified.

Can You Use an SBA Loan to Buy part of a Business?

The quick answer is no.

SBA 7(a) loans cannot be used to purchase part of a business.

You must buy 100% of the business if you are using an SBA 7(a) loan.

All that you can do is work out a consulting agreement up to 12 months, which you can bake into the deal in terms of a transition period. This is typically done if the seller wants more money than what the SBA 7(a) will qualify the business for and there are legitimate reasons for the consulting agreement.

Can I Do an Earn-Out or Seller Note with the Seller With an SBA 7(a) Loan?

Earn-outs are not permitted under SBA loan regulations. You cannot structure a deal where the seller gets paid out over several years on top of what you are paying back the government for the loan.

It could lead to conflicts.

A seller note is one way to bridge the gap if the numbers aren’t aligned, but this cannot be more than 5% of the business purchase price.

There are various ways to get a deal done if the SBA and the seller are far apart in numbers. That’s where an experienced team and business broker like JARBLY comes in to play.

Let Us Do the Vetting

If you retain us at JARBY we will find businesses that match your exact target criteria.

The average person spends 70+ hours when acquiring a business.

This goes into finding listings on the market, scoping out numbers, retrieving information, signing NDA’s, scoping through information, and more.

Ultimately you’re trying to find if it is a fit with your target criteria.

Example Target Criteria would be as follows.

• Asking Price Range:
• Revenue Range:
• EBITDA Range:
• Location:
• Industry-Specific:
• Active Role vs Passive Role:
• Online Business vs Brick and Mortar:
• Etc.

There are more target criteria you can include but those are the main ones we at Jarbly really expect from you to narrow down so that we can do our best to align a business with your needs.

Not only do we search for on-market listings, but we have access to off-market listings through our network.

We have the ability to line up businesses for you. That match your exact target criteria and we do all the heavy hitting.

You trying to buy yourself and save money on representation, might not be advantageous to you.

Buying a Business is a major decision. Don’t you want an experienced person guiding you to something that’s a good fit and vetted. It’s better having guidance when making a large transaction. When making big decisions it’s usually important to have multiple people decide on it. When you retain JARBLY you can have peace of mind we are comforting you with a decision.

You might err because you have less businesses to view and interact with, you might not be able to negotiate properly, you might upset the seller, and you might have trouble getting through the essential items in a transaction because this might be especially newer for you.

You also are probably less likely to structure a deal that nets you more in the end because of upfront vs earn-out scenarios, financing options, and negotiation tactics.

If you want maximal value, choose a quality professional.

What Our Processes Look Like to Save You Time and Get You the Maximum Price

From our group, we would:

– Scope out businesses in your industry, even in secondary industries you may not think of

– Look in other states that could be transferred or that are running remote

– Get an e signed nda on file

– Get detailed memorandum/prospectuses for review

– Get financing on the deal lined up for you

– Have calls and conversations with sell-side representation and management to ascertain where the deal is

– Help prepare an offer in an LOI

– Assist with transition through due diligence and close

To get started you can engage us by selecting the button below and we would love to hear your target acquisition criteria.

Retain Us for Your Buying Search