Our conventional wisdom is that a buyer for a business has to have at least 20% of the price in cash to put down, plus cover hefty closing costs.

In recent press reports we are all lead to believe that there is a “credit crunch” making it hard to get any credit for anything.

In spite of this, we recently (November 2007) completed a deal where the buyer got over $30,000 at closing from the bank. He was able to put that toward the cost of inventory, which cost a lot less. In other words, the buyer came out with money left over from the financing! A true “no down payment” deal!

It takes two things (at least) to do that. A lot of home equity and a business plan for the purchase that shows enough cash flow to cover the debt and still leave enough to live on. It also helps that the buyers spouse has a job with a good income.

But the point still is made very strongly that if you have a decent deal, a good credit rating, and the desire to buy a business, there is money available! Our local banks in New Hampshire didn’t pig out on the wave of sub prime and other risky mortgages. Most of the senior bank leadership lived through the crashes of the early 1990’s and learned from the experience. Call us for the name of the friendly banker for this deal. If you are looking in his part of the state, he is a great resource.

We still ask customers what they have for resources to put down, and we need to know your financial situation before we disclose lots of information about a business. But it is not always necessary to have lots of cash if you have other resources.

Even if you don’t have home equity you can now buy a business with the funds in a 401K if you do it properly.

Interest rates are still low by historical standards, and it is a great time to buy a business!

       KEENE:  Park Avenue Deli & Market, long a fixture on Keene’s west side, has been sold .  The new owners are Brian and Karen Cagney of Mont Vernon, NH, who plan to build upon the popularity of the business.  “We are very excited to take over ownership of a business that has served generations of

     The Park Avenue Deli & Market  has been in business at 30 Park Avenue in Keene for many years, formerly as Pare’s Market, and then for many years as McLay’s Market.  The Cagneys used to buy sandwiches at the market years ago when they lived in the area.  They will be continuing the business with the same departments and staff, and look forward to renewing their connections with the area and providing excellent service and value to the residents and businesses in the area.  In addition to the normal range of convenience store items, the market does a robust meat and deli business, and provides catered lunch items for businesses and parties in the area.

We recently brokered the sale of Popeye’s Variety Store in Conway from Bruce Frechette to Bryan Dries and Edward Kugler.

Other than one other owner, this popular, local convenience store with gas, has been in the Frechette family for many years. For the last five years, Bruce Frechette has carried on the family connection to this store serving the local population as well as the heavy tourist traffic that brings in business.

The new owners, Bryan Dries and Ed Kugler look forward to providing the same level of service that customers have come to expect in what will now be called Conway Variety.

One of the really significant problems with our business is that sellers wait too long to call us.

Small business owners are mostly people like us who work long hours and have a lot of pending things to do on their wish lists. Long range planning and exit strategy planning usually gets put down the list a ways.

BUT - The appropriate time to start planning for the sale of a business is when you buy or start it! And if you didn’t start planning then, any time now is not too late to start.

Particularly if your books are not in order, start keeping good records three years before you want to sell, if you want to be able to get out with bank financing for a buyer so you don’t have to finance the sale.

There are a lot of other things to check on that can really hurt you if you wait too long to deal with them. Little things like making sure your Trade name is properly registered, or that your LLC or Corporate annual reports have been properly filed with the Secretary of State.

We recently had a meeting with a good business lawyer who is offering a pre-sale audit to make sure that the things buyers lawyers will be looking for are in order before you get into the due diligence phase with a buyer and turn up something for them to use as a negotiating point to cost you money or time. We would be happy to give you a reference to him.

We like to talk with potential sellers well before they run into any one of the many things that cause a need to sell. We like to have the time to do a thorough review of the situation and come up with recommendations that would make a business sell for a higher price, and on better terms. We normally don’t charge you anything to do that but ask that you take the time to talk with us and show us your records.

As an additional benefit sometimes we are dealing with customers having a hard time to find something to buy, and may be able to bring you a buyer without your having to be put on the market for sale. That doesn’t happen often, but when it does, the deal usually involves a higher value for the sale.

If we can establish a relationship of mutual trust with a Seller well in advance of the need to sell, we are more confident of our ability to make a sale. Many businesses are not salable, or cannot bring the value they should, because of things that don’t seem important to sellers, but are very important to buyers and their accountants and lawyers. Often in a rush to bring a new listing to market, we will not find out about such problems until we, and the would-be seller, have put a lot of effort into marketing the business. Such things can easily kill a deal.

Call us for a visit, well in advance of your need to sell. And remember, the need to sell is often caused by unplanned events, like a death, divorce, or illness; all events that can significantly change a long range plan, and preclude adequate time to “get things in order”.

When I first got into this business over 20 years ago I was selling motels, B&B’s, other businesses, and land, and most of the time I was dealing with customers and clients that were of European/American backgrounds and were native English speakers like me.

My prior background involves work in other countries, international travel, and a couple of years living in East Africa, so I missed dealing with folks from other cultures.

It wasn’t long before we started dealing with significant numbers of people from other cultures buying convenience stores, motels, and dry cleaners. Our clients, the sellers, were still mostly Yankees of some variety. Often they would take the position that they wouldn’t sell to some of our ethnic groups of buyers. In every case we gave them the alternative to either accept all financially qualified customers or not do business with us.

Now in todays small business marketplace we have a rich mixture of customers from many different backgrounds and ethnic groups, and we are selling businesses for clients from a wide variety of ethnic backgrounds.

It is not unusual to have the children of some of our customers translate for their parents in conducting a sale. Sometimes we have to study the culture a customer comes from in order to figure out why they react so differently than we expect to the process of negotiating and complying with contracts.

The challenges combine to make our work more interesting, giving us all more chances to learn about other cultures, and adds a rich variety to our work. One of the “byproducts” of our work is a broad range of friends we make while we are doing business with them, and it is great that they now represent such a diverse group.

We have had several closings recently, and are being courted by bankers looking for deals to finance.

There is a lot of gloom and doom being spread by political candidates and the national media about the housing slump, credit crunches, foreclosures, and stock market volatility that is leading to customers thinking that they can’t get financing for deals.

I recently had to convince a customer to talk to a banker to get him to believe he could get financing and get him to make an offer on a business that he wanted to buy, and now has under contract.

Here in New Hampshire our local banks by and large did not get involved in the sub prime rackets that are bringing down the speculators and large mortgage brokers, so our banks are looking for ways to put money to work, and at rates that are still bargains in historical terms for commercial business loans.

Additionally the nationwide lenders who specialize in SBA guaranteed loans are still looking for business, because the ones we deal with are unaffected by the housing market problems.

So the bottom line is that if you can swing a 20% down payment, have a decent credit score, and the desire to own one of the businesses we have for sale you should be able to get financing.

Take a look at our listings and call us if you see something you want to investigate.

One of the first things we have to ask a potential buyer is how they plan to finance the purchase of a business. This usually leads to an education session about the terms that a buyer can expect to get on a business/commercial loan. Forget everything you have read or seen on television about “no money down” deals. Be ready to pay 20% down or more, be prepared for Adjustable Rate financing, and be prepared to provide personal guarantees.

Most of the deals we broker end up with local bank financing, and once in awhile financing is provided by a national lender specializing in SBA guaranteed loans. Frequently Seller financing is involved for some portion of the deal, and some times buyers end up drawing down credit cards or going to the “bank of family”.

In cases of Seller financing we always advise sellers to get enough down so that a buyer “will bleed if they walk away”. There is no set percentage to put down, it all depends on the deal. The horror stories we hear about sellers having to take back businesses that have failed usually involve previous sales with very low down payments, so that the buyers had minimal risk.

Our first suggestion is usually to go to the institution that currently holds a mortgage on the business involved, because they know the business and will usually be the easiest to deal with (unless the business is a distressed property).

Many of the deals we handle end up with SBA guaranteed financing. The bad news about that is that it increases the cost, both closing costs and loan rates, the good news is that deals get financed when they otherwise would not. When real estate is involved the most desirable financing often involves SBA 504 program loans processed thru development organizations, and straight business loans are usually guaranteed under the SBA 7(a) program. Full descriptions of the SBA programs are available on the SBA web site, http://www.sba.gov/aboutsba/index.html. We frequently have customers tell us they have been counseled by advisers not to accept SBA guaranteed loans because of past experiences. The SBA guarantee process now is very seldom any problem, and most of the horror stories involve customers who have bad credit or checkered histories, or businesses that have either high risk or very poor histories. The SBA programs are guarantee programs that reduce a lenders risk, so either a bank or other lending institution is always the real source of the money and has to first approve the financing.
During meetings with some local bankers on August 15th the rates they were quoting for loans that fit under the 504 program were in the 7% range, less than prime rate. Rates they were talking about for SBA 7(a) loans were in the 8% range. We have recently received proposals from other institutions offering rates of 10.5% to 10.75% on packages that included operating capital and involved as little as 10% down. Rates in the range of 2.5% over prime are common in business financing. Also most business loans will be at adjustable rates, so one important thing to look for is how long the initial rate is locked in before adjustments begin. Those terms may range from 3 months to 5 years, or more.

So it pays to shop around for a package that suits your needs. But expect financing to be a lot more expensive than residential (or even commercial) real estate, and be prepared to make serious down payments.

There is a lot of mythology floating around about business financing. Instead of listening to your back fence neighbor or the bartender down the street if you have questions about financing ask one of us, or a banker, (or better yet two different bankers).

Membership in the International Business Brokers Association provides us with a variety of resources. The following article is from a group they have written for us to share about the selling process. It is too good not to share in it’s entirety. As a company of Business Intermediaries we sure hope that if you have a business to sell you will follow the advice in the last paragraph and engage us to be a part of your team. If you engage us early in the process we can help point out some of the things you can do in the different categories mentioned below.

Adding Value to Your Business

If you’re looking to sell a business, it’s critical to look at the value of the business. But a typical business really has two values. The “academic” value is the one determined by a professional business valuation. The other is the “true market” value. The academic value is arrived at with a formula based on the firms’ hard assets, cash flow, industry averages and multiples. The fair market value also takes those items into consideration, but then considers what buyers are really willing to pay.

For many small and mid-sized businesses hard assets like equipment, vehicles, land, buildings, and inventory may be limited. For some small businesses there may be no hard assets at all. Instead, their value is based on intangibles like employees, business processes, customer lists, location and business relationships.

To maximize the fair market value of your business, it’s vital that you capitalize on those intangible assets.

Develop key employees. Buyers generally aren’t interested in paying a premium if the business relies on you for its success. Remember to delegate responsibility to key employees and involve your key staff members in the decision making process. Demonstrating that your company’s success is reliant on your capable, well-trained employees – not just you – will pay off at the time of sale.

Document what you do. Be sure that job descriptions, operation processes, and strategic plans are documented. Documented records and plans give a buyer greater comfort that he or she will be able to emulate your successful growth and will help your buyer obtain financing. Also, be sure to keep business records like sales and expense reports, internal profit and loss statements/balance sheet, and tax returns clean and well-organized.

Build relationships. Name recognition, customer awareness and your reputation are all part of your business value. Even if your company doesn’t have many hard assets, your relationships are key. Consider diversifying both supplier and customer accounts.

Improve cash flows. A potential buyer wants to see the “true cash flow.” And, of course, in the business world cash is king. Be sure you are driving all income to the bottom line.

Review your assets. Sell off or dispose of unproductive assets or unsalable inventory. Remove or buy off any assets that are primarily for your personal use.

Find and build your niche. You don’t have to be everything to everyone. Buyers will pay a premium for a niche that has barriers to competitive entry.

Remodel, clean, and organize. What’s the first thing anyone does when they put their home on the market? They spruce things up and make sure everything is in its right place. Yet, in business, that’s rarely considered. A well-maintained facility will get the best price. Even businesses that lease space can benefit from a thorough cleaning and organization to convey a feeling of quality and efficiency.

Keep these important intangible assets in mind if you’re looking to sell your business. They convey a value that financial statements alone do not. If you are looking to sell, make a plan. Start working on the intangibles well in advance of putting your business on the market. For many business owners, they reach a point where they burn out and psychologically retire early, before a sale is made. It’s important to work to keep your focus right until the sale is complete.

Finally, when the time to put your business on the market arrives, consider lining up key specialists who will help you make the most of the sale – an attorney, an accountant, and a business intermediary to name a few. Remember, you only have one chance to sell your business, so you want to do it right.

We are pleased to announce the sale of JSP Fabrications, Inc. of Charlestown, NH, from Joe and Patricia Pickul to Randy McNeil of Claremont, NH.

JSP Fabrications has the capacity to form up to ¼ inch metals and will strategically join with McNeil Sheet Metal, LLC. The companies will occupy and expand the current JSP Fabrications Plant located on Hammond Road in Charlestown.

Richard Butterfield, Broker Associate of our office represented the sellers and worked with the buyer to bring this transaction to a successful conclusion. Bob Edwards of Ocean National Bank of Keene, NH provided the financing package.

We are particularly pleased with this sale as it represents bringing together two organizations for a synergistic relationship, and they will continue to provide fabrication capabilities to a wide range of industries.