How Sellers Can Pre-Qualify Their Business for an SBA Loan

Transcript

Andy and JT welcome you to another episode of The Deal Board Podcast. This week, they explore why sellers should prequalify their businesses for Small Business Administration (SBA) financing before taking them to market. They discuss how prequalification can make a listing more attractive to buyers, why lenders want to see clean and current financials, and what sellers need to prepare before approaching a bank. Andy and JT also explain what a pre-screening letter does and does not guarantee, and why the buyer still needs to qualify based on credit, experience, available down payment, citizenship, and ability to operate the business. They delve into the importance of tax returns, profit and loss statements, balance sheets, seller’s discretionary earnings, addbacks, business summaries, and transparency. They also explain how SBA-style preparation can still help sellers in markets outside the United States, even where government-backed small-business lending is unavailable. Tune in to learn how the right preparation can make your business easier to finance, market, and get across the finish line.

Listing of the Week:

JT Harp from Transworld Cincinnati presents a thriving commercial glass contracting company with a strong reputation for precision, reliability, and craftsmanship. The company specializes in high-end glazing, storefronts, and complete glass systems for major regional projects. With skilled crews, long-term client relationships, and established systems, this turnkey opportunity is positioned for continued profitability and growth. For more information, call JT on (513) 725-7283 or email him at [email protected].

Deal of the Week:

Chris “Chip” Redmond from Transworld Orlando shares the recent sale of a cell phone repair store to a buyer who was already a repair technician. The seller was semi-absentee and lived out of state, so the buyer’s hands-on technical experience created an opportunity to reduce employee costs and improve profitability. The deal included a lease assignment rather than an extension, which means the buyer will need to revisit the lease when the current term expires. For more information, call Chris (Chip) Redmond at (407) 326-6990 or email him at [email protected].

Key Takeaways

[00:30] Introduction and what listeners can expect from today’s show.

[01:19] Discover why a prequalification is essential when selling a business.

[04:29] Learn how pre-screened listings help clarify down payment and loan structure.

[05:43] Find out why banks rely on three years of tax returns for cash flow.

[07:49] The importance of current financials, balance sheets, and profit and loss statements.

[08:28] How discretionary earnings and EBITDA apply to different types of business buyers.

[09:51] Explore why documented addbacks and expenses need to be explained.

[11:53] Deal of the Week: Chris “Chip” Redmond from Transworld Orlando sold a cell phone repair store to a buyer with repair technician experience.

[13:49] Understand why messy bookkeeping can make SBA financing harder.

[16:07] Whether it is worth hiring outside bookkeeping for your financials.

[17:45] Get a breakdown of what buyers need to qualify for SBA financing.

[19:52] Hear how partners and guarantees can affect closing a deal.

[21:06] Uncover why SBA-style preparation helps sellers in any market.

[22:54] Listing of the Week: JT Harp from Transworld Cincinnati presents a commercial glass contracting company with skilled crews, long-term client relationships, and strong growth potential.

[24:06] Closing comments and final takeaways.

Show Notes

“I think a [prequalification] helps the buyers understand that this is financing ready.” — Andrew Cagnetta [0:02:57]

“The banks – live and die by tax returns.” — Andrew Cagnetta [0:05:43]

“Doing all [the preparation] work upfront on the seller’s part, gives the seller a lot more confidence that you are going to market now with a business that’s ready.” — JT Tatem [0:11:29]

“The buyer has to be qualified to run the business.” — Andrew Cagnetta [0:19:05]

Mentioned in This Episode

• The Deal Board Podcast
• Subscribe to The Deal Board Podcast YouTube Channel
• United Franchise Group
• Transworld Business Advisors
• Transworld on LinkedIn
• Transworld on Facebook
• Email us [email protected]
• LoanBud
• Chris “Chip” Redmond
• JT Harp