An SBA pre-qualified business often attracts a larger pool of buyers, supports stronger purchase offers.
Most business owners believe the first step in selling their company is determining its value.
In reality, one of the smartest first steps is determining whether the business is SBA financeable.
For businesses selling between approximately $500,000 and $5 million, an SBA pre-qualification can significantly increase the number of qualified buyers, improve the likelihood of obtaining the asking price, and help the transaction close more quickly.
Only a small percentage of buyers have enough cash to purchase a business outright.
An SBA pre-qualification demonstrates that qualified buyers may be able to finance a substantial portion of the purchase price, including goodwill. This opens your business to a much larger pool of executives, entrepreneurs, and first-time business owners who otherwise could not purchase your company.
More qualified buyers typically result in more competition—and stronger offers.
Businesses are purchased based on their ability to generate sufficient cash flow to support debt payments.
An SBA pre-qualification helps determine whether the company’s historical cash flow can support the anticipated purchase price under SBA lending guidelines.
When buyers know financing is achievable, they are often willing to pay a stronger price because they can spread the acquisition cost over longer repayment terms.
Many business sales fail after months of negotiations because financing issues are discovered too late.
An SBA pre-qualification identifies potential concerns before the business is marketed, including:
Correcting these issues early creates a smoother transaction and greatly improves the likelihood of closing.
Sophisticated buyers and business brokers are more comfortable pursuing businesses that have already been reviewed for SBA financing.
A pre-qualified business demonstrates that the company’s financial performance appears capable of supporting acquisition financing, giving buyers greater confidence when submitting offers.
Because much of the lender’s preliminary review has already been completed, the financing process often moves more efficiently once a buyer is under contract.
This reduces delays and allows buyers, sellers, lenders, accountants, attorneys, and business brokers to focus on completing the transaction.
An SBA pre-qualification helps determine the most financeable transaction structure, including:
Proper structure at the beginning often prevents costly renegotiations later.
The preliminary review is straightforward. While additional information may be requested during underwriting, sellers should generally be prepared to provide:
One of the most important steps is preparing a normalized cash flow analysis.
This includes identifying legitimate owner add-backs and calculating Seller’s Discretionary Earnings (SDE) or EBITDA, depending on the size of the business. This analysis helps determine whether the business generates sufficient cash flow to support SBA financing at the desired purchase price.
An SBA pre-qualification is more than a financing exercise—it is a marketing advantage.It helps establish a realistic selling price, increases the number of qualified buyers, reduces financing surprises, improves buyer confidence, and significantly increases the likelihood that your business will sell at its maximum value.
At Sterling Business Brokers, we evaluate your company’s SBA financeability before it goes to market. We identify potential underwriting issues, prepare the business for lender review, and help position your company to attract qualified buyers who can successfully obtain financing.
AN SBA PRE-QUALIFIED BUSINESS IS POSITIONED TO DO EXACTLY THAT.
