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MATCHMAKERS: MORE THAN JUST BUSINESS BROKERS
| CAN I FINANCE A BUSINESS? |
Financing Facts
There still aren't too many ways to finance the purchase of a business. Here are the primary
methods:
Buyer Financing:
Some buyers may have the cash available to purchase the business. Some may elect to use
equity in their residence or other real estate. Others may have other assets that they can sell or
borrow against.
Bank Financing:
Banks may lend against a buyer's assets as described above. They may also lend against the
assets of the business, assuming there is sufficient value to support the loan. The business will
also have to make sense to the bank, regardless of the asset value. In fairness to the banking
system, many of the figures supplied by business owners have very little relationship to the actual
earning power of the business.
Venture Capital Firms:
These firms do not, as a practice, lend to small or even many mid-size businesses unless
tremendous growth is anticipated. They also usually expect an equity position in the company.
SBA Loans:
What is the SBA? The SBA is the United States Small Business Administration that has been in
existence since the 1950's. The 7a SBA program allows customers to obtain financing for a variety
of reasons which includes business acquisition financing. This financing allows banks to offer more
favorable terms than are normally available. In fact, some banks offer terms of up to 10 years with
no balloon payment and no prepayment penalties on these business acquisitions. In addition,
business acquisitions that include the commercial real estate can be financed for longer fully
amortizing terms.
SBA have become more popular. There is now some competition among lenders for these loans.
Many banks offer them, but the preferred SBA lenders seem to have the upper-hand in both
acceptance and service.
Other Sources:
This category includes family, friends, credit cards, and leasing companies. Some suppliers have
been known to assist in the financing of a small business.
Seller Financing:
This is, by far, the largest source of financing available for the purchase of a business. Many
industry experts say about 90 percent of small businesses sell with, or perhaps, because of, the
seller financing a good portion of the sale price. Buyers have much more confidence in the
decision to purchase a business when the seller is willing to assist in the financing. The buyer has
confidence that the seller believes that the business will service the debt, in addition to providing a
living wage.
Business Financing
PNC Bank
Lisa Kennedy
Vice President
SBA Finance Group
Phone 610 - 725 - 5940
Fax 610 - 695 - 0986
email: lisa.kennedy@pncbank.com
SBA Financing
Commercial Mortgages
Business Recapitalizations
Business Financing
UPS Financial
Ed Narozny
Director of Business Development
Phone 407 - 569 - 2135
Fax 407 - 569 -2136
email: enarozny@ups.com
SBA Financing
Commercial Mortgages
Business Recapitalizations
The Necessary Paperwork You need to hand in an SBA loan application..
1) Copy of Purchase contract
2) Copy of management resumes for each applicant owning 20% or more of business signed and
dated-you can use the one in the SBA application
3) Copy of personal tax returns for 2007, 2006, 2005 signed and dated for each applicant owning
20% or more of the business
4) Personal financial statement, signed and dated, for each applicant owning 20% or more-you
can use the one in the SBA application
5) Corporate tax returns of business for seller 2007, 2006, 2005 signed and dated.
6) Business plan including products and services, location,demographics, # of employees,
customer base.
7) Copy of green card if applicable front and back.
8) Name address and phone # of banker,accountant and attorney.
9) Check for $5,000 or more, refundable if loan is declined.
10) Interim financial statement for sellers business up to the last quarter of the current year
(6/30/2008).
11) Aging of receivables and payables if applicable.
12) Last 3 years of tax returns for any other business that the borrowers currently owns.
13) Copy of personal bank statements for the last two months showing cash to buy the business.
14) Seller to fill out 4506 IRS tax form (requesting 3 years of originals tax returns from the IRS.
15) Buyers gift letter if the down payment is coming from a relative.
16) Life insurance on buyer as requested by SBA
Document checklist in order to close on an SBA loan.
Corporate Information ( of borrower and any corporate guarantor, if applicable)
1. Articles of Incorporation, with any amendments
2. Certificate of good standing from Florida Department of state
3. Corporate By-Laws
4. List of all corporate officers and their titles
5. Copies of all issued stock certificates and next blank certificate (front & back)
6. Corporate seal-(please bring to closing)
7. Filed fictitious name certificate from Dept of State (if applicable)
8. Federal Tax Identification
Other closing Requirements:
1. UCC-1 filed with the secretary of state(form to be provided by lender's counsel)
2. Copies of vehicle title/registration
3. Attorney opinion letter from borrowers counsel in a form acceptable to lender
(Form to be provided by lender counsel)
4. Copy of promissory note evidencing borrower's/guarantor's/principal's existing obligation to
borrowing entity or other third party (said obligation to be subordinated to lender's loan(
5. Lease (Fully executed covering the term of the loan)
6. Collateral assignment of lease with landlord's consent & waiver of lien rights
(form to be provided by lender's counsel)
7. Copies of all applicable business licenses/permits required for borrower's business. In the
alternative, an application for same validated by the county/city is acceptable.
8. Detailed list or invoices for all machinery, equipment,furniture,fixture and or inventory which will
secure this loan. The list or invoices should include item,model# description and serial #
9. Evidence of cash injection into the business by the individual principals of the borrower. This
should be in the form of cancelled checks with appropriate invoices or receipts marked "paid" All
such evidence must reflect that the injected funds originated from the personal accounts of the
borrower
The easiest way to show proof of your cash injection into your business is to supply us with copies
of the following:
A. From your individual/personal bank account:
1. Copy of canceled check issued by you to your business, or
2. Copy of bank statements reflecting the debit of this check.
No credit card receipts accepted for cash injection and vendor invoices.
10. ESTOPPEL LETTER FROM EXISTING LENDER EVIDENCING THE EXACT AMOUNT OF THE
LOAN TO BE PAID OFF BY BORROWERS AT OR PRIOR TO CLOSING (IF APPLICABLE)
11. Collateral assignment of lease and lien subordination,if applicable. (form to be provided by
lender's counsel)
12. Copy of finalized itemized invoice for borrower's attorneys fees (required at closing for
attachment to the SBA compensation agreement)
13. Certificate of occupancy or other evidence from county that subject improvements have been
completed in accordance with all applicable code & county requirements.
Insurance Requirements:
1. Life insurance on the life/lives, each in the amount of the loan(for a total amount of ______ to
be collaterally assigned to the lender. (Lender or lenders agent must be in possession of the
original policy prior to closing)
2. Collateral assignment of Life insurance policy. You will have to contact your agent to obtain an
assignment of benefits/proceeds form for the policy-this form must be completed and filed with
home office of your insurance company in favor of the lender.
Life insurance Instructions:
A complete copy of the life insurance policy on the life/lives of the borrower(s) at least in the
amount of the loan, as defined in the conditional commitment letter and SBA authorization and the
loan agreement must be received by the lender, prior to closing. Decreasing term insurance is
acceptable. Borrower may use existing life insurance to meet this requirement.
Note: Life insurance policies used as collateral for this loan may not be group policies) or
government policies). In addition, lender can not be named as beneficiary on the policy.
You will have to contact your agent or insurance company and obtain an assignment of life
insurance policy as collateral form for the policy which is approved by your insurance company.
Please execute the form, have your signature notarized,if required, and return to your agent who
will forward the document to the home office of your insurance company.
This form must be filed/recorded with home office of your insurance company. The endorsement
should list the lenders legal address.
3. (Personal Property) Evidence of hazard insurance coverage on all collateral in the full
replacement cost/maximum insurable property located at your address. Lender is to be named as
mortgagee insured in first position.
4. (Personal Property) Evidence of flood insurance coverage, if applicable, in the full replacement
cost/maximum insurable value on real property located at buyers address.
A closing cannot be scheduled until all items in this checklist have been received and deemed to
be satisfactory by the lender.
Please note that this checklist is an overview of the information required by the commitment letter
and does not constitute a final binding list of items which may be required by the lender prior to
closing. All questions regarding the above documents/information should be discussed with
lender's represenative to ensure a smooth and efficient closing
There still aren't too many ways to finance the purchase of a business. Here are the primary
methods:
Buyer Financing:
Some buyers may have the cash available to purchase the business. Some may elect to use
equity in their residence or other real estate. Others may have other assets that they can sell or
borrow against.
Bank Financing:
Banks may lend against a buyer's assets as described above. They may also lend against the
assets of the business, assuming there is sufficient value to support the loan. The business will
also have to make sense to the bank, regardless of the asset value. In fairness to the banking
system, many of the figures supplied by business owners have very little relationship to the actual
earning power of the business.
Venture Capital Firms:
These firms do not, as a practice, lend to small or even many mid-size businesses unless
tremendous growth is anticipated. They also usually expect an equity position in the company.
SBA Loans:
What is the SBA? The SBA is the United States Small Business Administration that has been in
existence since the 1950's. The 7a SBA program allows customers to obtain financing for a variety
of reasons which includes business acquisition financing. This financing allows banks to offer more
favorable terms than are normally available. In fact, some banks offer terms of up to 10 years with
no balloon payment and no prepayment penalties on these business acquisitions. In addition,
business acquisitions that include the commercial real estate can be financed for longer fully
amortizing terms.
SBA have become more popular. There is now some competition among lenders for these loans.
Many banks offer them, but the preferred SBA lenders seem to have the upper-hand in both
acceptance and service.
Other Sources:
This category includes family, friends, credit cards, and leasing companies. Some suppliers have
been known to assist in the financing of a small business.
Seller Financing:
This is, by far, the largest source of financing available for the purchase of a business. Many
industry experts say about 90 percent of small businesses sell with, or perhaps, because of, the
seller financing a good portion of the sale price. Buyers have much more confidence in the
decision to purchase a business when the seller is willing to assist in the financing. The buyer has
confidence that the seller believes that the business will service the debt, in addition to providing a
living wage.
Business Financing
PNC Bank
Lisa Kennedy
Vice President
SBA Finance Group
Phone 610 - 725 - 5940
Fax 610 - 695 - 0986
email: lisa.kennedy@pncbank.com
SBA Financing
Commercial Mortgages
Business Recapitalizations
Business Financing
UPS Financial
Ed Narozny
Director of Business Development
Phone 407 - 569 - 2135
Fax 407 - 569 -2136
email: enarozny@ups.com
SBA Financing
Commercial Mortgages
Business Recapitalizations
The Necessary Paperwork You need to hand in an SBA loan application..
1) Copy of Purchase contract
2) Copy of management resumes for each applicant owning 20% or more of business signed and
dated-you can use the one in the SBA application
3) Copy of personal tax returns for 2007, 2006, 2005 signed and dated for each applicant owning
20% or more of the business
4) Personal financial statement, signed and dated, for each applicant owning 20% or more-you
can use the one in the SBA application
5) Corporate tax returns of business for seller 2007, 2006, 2005 signed and dated.
6) Business plan including products and services, location,demographics, # of employees,
customer base.
7) Copy of green card if applicable front and back.
8) Name address and phone # of banker,accountant and attorney.
9) Check for $5,000 or more, refundable if loan is declined.
10) Interim financial statement for sellers business up to the last quarter of the current year
(6/30/2008).
11) Aging of receivables and payables if applicable.
12) Last 3 years of tax returns for any other business that the borrowers currently owns.
13) Copy of personal bank statements for the last two months showing cash to buy the business.
14) Seller to fill out 4506 IRS tax form (requesting 3 years of originals tax returns from the IRS.
15) Buyers gift letter if the down payment is coming from a relative.
16) Life insurance on buyer as requested by SBA
Document checklist in order to close on an SBA loan.
Corporate Information ( of borrower and any corporate guarantor, if applicable)
1. Articles of Incorporation, with any amendments
2. Certificate of good standing from Florida Department of state
3. Corporate By-Laws
4. List of all corporate officers and their titles
5. Copies of all issued stock certificates and next blank certificate (front & back)
6. Corporate seal-(please bring to closing)
7. Filed fictitious name certificate from Dept of State (if applicable)
8. Federal Tax Identification
Other closing Requirements:
1. UCC-1 filed with the secretary of state(form to be provided by lender's counsel)
2. Copies of vehicle title/registration
3. Attorney opinion letter from borrowers counsel in a form acceptable to lender
(Form to be provided by lender counsel)
4. Copy of promissory note evidencing borrower's/guarantor's/principal's existing obligation to
borrowing entity or other third party (said obligation to be subordinated to lender's loan(
5. Lease (Fully executed covering the term of the loan)
6. Collateral assignment of lease with landlord's consent & waiver of lien rights
(form to be provided by lender's counsel)
7. Copies of all applicable business licenses/permits required for borrower's business. In the
alternative, an application for same validated by the county/city is acceptable.
8. Detailed list or invoices for all machinery, equipment,furniture,fixture and or inventory which will
secure this loan. The list or invoices should include item,model# description and serial #
9. Evidence of cash injection into the business by the individual principals of the borrower. This
should be in the form of cancelled checks with appropriate invoices or receipts marked "paid" All
such evidence must reflect that the injected funds originated from the personal accounts of the
borrower
The easiest way to show proof of your cash injection into your business is to supply us with copies
of the following:
A. From your individual/personal bank account:
1. Copy of canceled check issued by you to your business, or
2. Copy of bank statements reflecting the debit of this check.
No credit card receipts accepted for cash injection and vendor invoices.
10. ESTOPPEL LETTER FROM EXISTING LENDER EVIDENCING THE EXACT AMOUNT OF THE
LOAN TO BE PAID OFF BY BORROWERS AT OR PRIOR TO CLOSING (IF APPLICABLE)
11. Collateral assignment of lease and lien subordination,if applicable. (form to be provided by
lender's counsel)
12. Copy of finalized itemized invoice for borrower's attorneys fees (required at closing for
attachment to the SBA compensation agreement)
13. Certificate of occupancy or other evidence from county that subject improvements have been
completed in accordance with all applicable code & county requirements.
Insurance Requirements:
1. Life insurance on the life/lives, each in the amount of the loan(for a total amount of ______ to
be collaterally assigned to the lender. (Lender or lenders agent must be in possession of the
original policy prior to closing)
2. Collateral assignment of Life insurance policy. You will have to contact your agent to obtain an
assignment of benefits/proceeds form for the policy-this form must be completed and filed with
home office of your insurance company in favor of the lender.
Life insurance Instructions:
A complete copy of the life insurance policy on the life/lives of the borrower(s) at least in the
amount of the loan, as defined in the conditional commitment letter and SBA authorization and the
loan agreement must be received by the lender, prior to closing. Decreasing term insurance is
acceptable. Borrower may use existing life insurance to meet this requirement.
Note: Life insurance policies used as collateral for this loan may not be group policies) or
government policies). In addition, lender can not be named as beneficiary on the policy.
You will have to contact your agent or insurance company and obtain an assignment of life
insurance policy as collateral form for the policy which is approved by your insurance company.
Please execute the form, have your signature notarized,if required, and return to your agent who
will forward the document to the home office of your insurance company.
This form must be filed/recorded with home office of your insurance company. The endorsement
should list the lenders legal address.
3. (Personal Property) Evidence of hazard insurance coverage on all collateral in the full
replacement cost/maximum insurable property located at your address. Lender is to be named as
mortgagee insured in first position.
4. (Personal Property) Evidence of flood insurance coverage, if applicable, in the full replacement
cost/maximum insurable value on real property located at buyers address.
A closing cannot be scheduled until all items in this checklist have been received and deemed to
be satisfactory by the lender.
Please note that this checklist is an overview of the information required by the commitment letter
and does not constitute a final binding list of items which may be required by the lender prior to
closing. All questions regarding the above documents/information should be discussed with
lender's represenative to ensure a smooth and efficient closing
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