complimentary value range for business owners

Get Early Access to new listings BEFORE they go public.InsideTrack logo

Acquiring or Retiring?

Acquiring or Retiring?

Article Adapted by Minnesota Trucking Association

This may be the best business-for-sale climate in the last 20 years!

Buyers and Sellers will often question me when I make this statement. I explain that in my 20 years of selling businesses, I’ve never seen a more perfect time to acquire or retire, depending on your current station in life. Here’s why:

Acquiring: Acquisition of a business has never been more attractive.

If you’re considering an SBA loan. Often transportation businesses have a difficult time getting fair treatment of their assets because banks typically don’t like “rolling stock” (assets). This has always been a roadblock with conventional financing because of the inability to close that gap between asset value, buyer down payment, and the goodwill to show for all your hard work. Using an SBA alternative makes great sense these days. The purse strings on government money have loosened quite a bit, and the incentives for buying a business have never been greater. Here’s why….

Lower borrowing rates: SBA rates are at  historic lows. As of this edition, the rate for a 7a loan is under 5% for a 10-year fixed. Just one year ago, that rate was hovering at 7%+. Translation: that’s a $2,000 per month interest savings, or $240,000 savings over the 10-year term on a $2,000,000 loan.

Payment forgiveness: The SBA will pay the first 3 months of your payments on your behalf.

This could provide a maximum discount of up to $9,000 per month. If that wasn’t enough…

SBA Guaranty fees waived: The SBA will waive their guaranty fees and that can be significant. As an example, this translates to a savings of nearly $100,000 on a $2,000,000 loan.

Limited time offer: All of these incentives can mean upwards of $370,000 in savings to the borrower. The recently approved SBA-COVID relief package to purchase a business using SBA-backed funding, but time is limited. This relief opportunity ends on September 30, 2021. So, you’ll need to start shopping now.

Alternatively,

Retiring: Retiring from the business you own will now be that much more enticing. If you’ve decided to sell your company in the next few years, doing so sooner rather than later might be your best option. I am not trying to scare any potential business sellers out there. Quite the contrary. In today’s climate, selling your business now, may be the best business decision you’ll ever make. Here’s just a couple of reasons why:

Lower rates: Better terms for buyers means they are more highly motivated to acquire, which means more buyers, which means a higher sales price.

Higher valuations: Businesses that sold in the 2nd half od 2020 were valued at higher multiples than at any other time in recent memory.

Taxes implications: One other serious consideration for any Seller should be the impending tax rate hikes that are expected over the next few years and what impact that’s going to have on capital gains. Waiting may not be your best solution.

Dan Arcand
Business Broker, Transportation and Manufacturing Industry Expert

Member of the Minnesota Trucking Association TM
darcand@sunbeltmidwest.com
651-288-1620