As I repeatedly stress, there are myriad ways to fund your business’ growth. After spending time with a friend of mine who is an SBA business loan specialist (who previously worked for CIT, a former, very large SBA lender, and now works for the SBA), I thought it wise to remind everyone that the SBA can be a viable funding guarantor for certain types of transactions, including mergers and acquisitions.
I did not
Following is a direct excerpt of the transcript of the 13-page presentation:
“SBA for M&A: Calculating Enterprise Value • Determining the value of a business (not including real estate which is separately valued through an appraisal) is the key component to the analysis of any loan application for a change of ownership. Note: Any amount in excess of the business valuation may not be financed with the SBA guaranteed loan. • An accurate business valuation is required because the change in ownership will result in new debt unrelated to business operations and create an intangible asset. • A business valuation assists the buyer in making a determination that the seller’s asking price is supported by historic operations and permits the buyer to make a reasonable return on his or her investment. • Lender Verification of Business Valuation Financial Data – Lender must obtain a copy of the financial information relied upon by the individual who performed the business valuation and verify that information against the seller’s IRS transcripts to ensure the accuracy of the information.”