Business Team Reveals Findings of Sub-Prime Affects on Selling Businesses
The short answer is no or at least not yet. Certainly buyers and lenders tend to exhibit more caution during uncertain economic times and one common source of a buyer’s down payment, the home equity line, has been considerably affected both by reduction in available equity (loan- to- values have shrunk) and the reduced value of the home itself. This has caused buyers to start using their 401K Retirement Funds to fund the down payment for the purchase of a business.
Fortunately, the financing for the more profitable acquisitions is being provided by the Small Business Administration (SBA) which makes loans of up to $2 million and up to eighty percent of the purchase price. Since the SBA program is self-funding and the paper is guaranteed by the U.S. Government, there is NO liquidity crisis here. While pricing of small to medium business remains firm, the cautionary mood of lenders does require a greater degree of preparation on the part of a business owner who chooses to go to market now. More so than a year ago, successful funding requires a well-researched and thorough package that anticipates and succinctly answers the lender’s concerns.
According to a recent poll of three escrow offices (two in the SF Bay Area and one in the Los Angeles area) sales for business opportunities in 2007 were equal to or greater than sales in 2006. Susan Dunn of William H. Dunn Attorney at Law in Campbell, California, said that 2007 was about the same or better than 2006.”We had some big multimillion dollar deals that happened in 07 that put us at about the same level or a little ahead,” says Dunn. “We usually get busier toward the summer.”
Judy Hetland of Financial Title in Concord, California, said that 2007 was definitely better than 2006. “We were up at least 15 to 20 percent,” says Hetland. Speculatively speaking, Hetland thinks she may know why. “I have a theory,” says Hetland. “I have seen many people buying businesses that wouldn’t normally be buying them, like real estate agents.”
Cindie Kim of United Escrow located in Torrance, California, said that while the number of transactions didn’t drop from 2006 to 2007, she did notice a difference in the dollar amount towards the end of 2007. “In Los Angeles County, I have noticed that the dollar amount for the average transaction has gone down,” says Kim. “Last year we saw average deal sizes between $300,000 to $400,000 dollars. In the year 2007 we have seen a drop of approximately $50,000 to $70,000 per transaction.”
Business Team grew substantially during 2007 when BizSellBrokers, Inc., the largest business brokerage in the US, dropped their Sunbelt franchise and merged with Business Team. Additional growth came through the opening of new offices in Newport Beach, Woodland Hills, Seattle and St. Louis. Today Business Team has more than 150 full time professionals engaged in the sales and acquisitions of small to mid-sized businesses. Business Team offers sellers (www.business-team.com/N_portals/sell.asp) the ability to access the largest database of buyers and in turn, offers buyers the largest single source of businesses for sale. Last year Business Team sold over 320 businesses and currently offers more than 750 businesses available for sale.
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About Business Team
Business Team is a unit of BTI Group and a member of the International Business Brokers Association and the California Association of Business Brokers. Business Team is the largest brokerage firm in the Western United States, with business brokers specializing in businesses for sale and selling businesses in Northern California, Southern California, Nevada, Missouri, and Washington, as well as, eCommerce and Internet businesses.