Selling a small business, and buying one were the topics of my last two blogs. Moreover, I touched on the importance of financing to facilitate the transaction. It is the glue that keeps the transaction together.
So where are you going to look for a business acquisition loan? “Sixty-eight percent of those seeking financing in the next six months said they will pursue a bank loan,” according to a piece in the Credit Union Times. It cited a survey of 6,000 business owners by Pepperdine University and Dun & Bradstreet.
In other words, you are most likely to shop around for a bank that is willing to make small-business loans in today’s tight credit environment, likes the industry that your targeted business is in, and considers you, personally, to be a good credit risk.
The most likely place to begin is at the bank where you have a checking account, a home equity line of credit, or a credit card. That’s because you’ve been told that established relationships make it easier for you to borrow money.
But too many borrowers have been disappointed that their established banking relationships have not been sufficient when it comes to borrowing money. So armed with your business plan in hand, you solicit all the banks in your neighborhood.
You quickly learn that you are one of many would-be borrowers shopping for a small-business loan. Furthermore, loan officers wince when they see the thickness of your business plan. What’s more, they are quick to offer you a loan application without taking the time to know if your proposal will be of interest to their loan committee or not.
When you apply for a loan with several lenders, each bank routinely orders a credit report in order to purge your application from the multitude of others without having to read your voluminous business plan. And even though you have excellent credit, your credit report list all of the other banks who have also ordered credit reports. Hence the loan officer knows you have been turned down by multiple banks and will follow the herd. Your proposal has become tainted.
Meanwhile the deadline on your purchase contract has long passed and the seller decides not to renew it.
The lending industry has operated that way for many years until BoeFly modernized the way that bankers and borrowers transact their business. The online marketplace uses cutting-edge technology to connect over 2,200 lenders with applicants that meet their specific requirements.
Unlike shopping from bank to bank in your neighborhood, BoeFly’s platform seamlessly connects you with interested lenders based upon the SmartForm loan request that you post online. And because BoeFly’s lenders are on the site solely to make loans, qualified applicants get quick, multiple offers to choose from. Equally as important, closings are fast because all the necessary settlement documents are uploaded to BoeFly’s site. Thus you are more likely to meet the purchase contract deadline and buy the business.
The Credit Union Times article went on to say that 67 percent of the small-business owners surveyed “were unsuccessful in securing a bank loan.” It did not indicate whether they used the old methodology of shopping from bank to bank with their business plans or if they used BoeFly’s SmartForm loan request. Additionally, it didn’t indicate how many of the 6,000 surveyed were not fundable because of credit issues or insufficient previous experience.
That is why BoeFly created a free Business Fundability App. You answer a few questions find out within seconds if you match the requirements previously entered by BoeFly’s member lenders.
The old way of getting financing works well when your existing banker knows you well and embraces your enthusiasm for the business that you want to buy. Your banker and his loan committee must also understand your contractual deadline to close the deal and be willing to move quickly. Otherwise you are relegated to shopping your business plan to numerous banks until you find the right one.
Jerry Chautin is a former entrepreneur, commercial mortgage banker and business lender. He writes and blogs about business and real estate for several publications and is SBA’s 2006 national “Journalist of the Year.” Jerry is a volunteer business mentor with SCORE, “Mentors to America’s Small Business,” offering free business advice. Post your comments and ask questions on this Blog or send Jerry an e-mail.
Copyright © 2012 Jerry Chautin — All rights reserved.