What exactly is an SBA loan is and how does it differ from a traditional loan? Paul Liles, the Managing Director of SBA Lending of CIBC Bank, joins Domenic Rinaldi in this episode to discuss SBA loans and how you can secure one.  Tune in to today’s show to learn how you can get your business to show the best cash flow before selling, the most important financial statements for the bank and the SBA loan process, and what buyers should be looking for when considering an M&A transaction.

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Paul Liles: Securing An SBA Loan

The capital markets for business acquisition loans are open and active. SBA bank lending has become a primary source for deals when the loan amount is $5 million or less. However, having a buyer and seller both qualify for an SBA bank loan can be tricky. Our guest, Paul Liles, is the Managing Director for the SBA program at CIBC bank. CIBC is the fifth-largest bank in Canada. With its acquisition of the private bank of Chicago in 2017, it has risen to the top 10% of all SBA lenders in the US. The CIBC SBA group led by Tom Doherty in Chicago with Paul Liles as the SBA guru had become a major factor in the SBA lending world.

Prior to joining CIBC USA in 2012, Paul was with the business banking units of JPMorgan Chase and US Bank. He has spent most of his career helping business owners scale and grow their businesses through sophisticated banking instruments and acquisition loans. We will be talking with Paul about his experience in helping buyers and sellers secure SBA lending and the ins and outs of this type of loan. I’ve also had the opportunity to get to know Paul on a personal level and know that he’s an avid outdoorsman. We both share a love for fishing, but probably the most fun that Paul and I have had is the opportunity to be in an annual golf outing. We are undefeated. What do you think about that?

It’s hard to find anybody to beat us yet, even though I would rely on your golf skills more than mine.

Paul, thanks for joining me. I’m excited to dive into the world of SBA lending. Maybe you could explain to everybody, what is an SBA loan? A lot of people think when they’re applying for an SBA loan that the SBA is loaning them the money when in fact, that’s not the case.

When it comes to the SBA financial institutions such as CIBC, we are SBA lenders and we’re lending that money out to our borrowers. It’s not necessarily the SBA lending any of those funds out to our clients. They’re more or less guaranteeing the loan. Typically, up to 75% of that loan is guaranteed by the government through the SBA program. We’re more or less 100% or 90% financing of that potential acquisition or that other SBA type facility.

If I got this right and the readers understand this, a buyer comes to you and they want to borrow some money, they can get 90% of whatever loan amount they need up to $5 million and then the SBA is covering 75% of that. Meaning, if something were to happen or go wrong with the loan, the SBA is then covering that?

When it comes to the SBA, there are three main reasons that you’re looking at an SBA opportunity for financing. The number one reason is usually there’s a collateral shortfall. Traditional bank financing wants 100% collateral coverage to secure the loan, whereas SBA does not require 100% collateral. You still have to at least attempt to fully secure the loan. The other main reason is a 10% equity contribution is the minimum that is required of our borrower, whereas maybe in traditional financing, you’re talking about a much higher equity downstroke in order to get conventional financing. It makes it more advantageous from an SBA perspective on the equity portion.

The third piece is the longer amortization or the term of the loan that the SBA allows you to extend out for financing. Most acquisition deals, excluding real estate, you can go up to a ten-year term or amortization. That’s a lot longer than what you see on the conventional side. It’s a great tool for people that are looking to acquire a business to get financing outside of putting all the cash down or 100% seller financing in order to make that acquisition and use this SBA facility. From a bank standpoint, we have that 75% guarantee from the government, which allows us to feel a little more comfortable from that lack of potential collateral or stretching out the term of the loan.

You talk about collateral, let’s spend a minute talking about that so people understand. In a conventional loan, banks are looking to make sure that they’ve got most of that loan covered with some sort of hard asset. In the SBA, that’s not the case. The SBA allows for what we call a lot of goodwill lending. Do you see maybe sometimes 80%, 90% of a loan can be goodwill in some cases?

 

Yeah, especially with acquisition financing, most of the transactions are going to have a large portion of goodwill. In certain industries you may have some specific hard assets, equipment, you may have some real estate involved, but usually when somebody is acquiring a business, they’re buying the goodwill or the intangible assets of that business. I would definitely say, in most transactions, you’re going to see a good portion of that being goodwill.

SBA becomes a great vehicle when there aren’t those hard assets. You’ve been doing this for a long time. This is probably a stab in the dark, how many deals do you think you financed in your career?

In the acquisition field, what we’re usually doing is about 3 to 4 acquisition finance deals a month. Take the last few years, you’re maybe looking around 100 to 120 transactions on the acquisition side.

You’ve seen and done it all. You got tremendous experience in this area. Let’s take it from two angles. A buyer looking for an SBA loan is going to need to meet certain requirements, but the seller also needs to understand what the SBA is going to be looking for. Why don’t we start from the seller side? We have a seller that wants to sell their business, what do they need to know about their business being qualified for an SBA loan? Even though they’re not having to qualify the buyer, but it’s important that the seller understands this because if their business doesn’t qualify, no buyer is going to get a loan to buy that business.

The biggest thing that we’ve learned and the lessons learned from doing a lot of transactions, the best advice that we can always give somebody who’s looking to sell their business, whether it’s somebody out in the market or even some of our own clients, is getting your business prepared to sell. By that we mean, getting your financials in order, cleaning up your books, going through and trying to see from the eye of what the bank is going to be looking at. What the bank is looking at is whether are those add-backs that we can build into cashflow to make that transaction work.

A seller going in, meaning they’re looking at their books, they’re cleaning up, they’re paying a lot of personal expenses out of the business. A lot of hard to track and follow expenses that are embedded into the P&L or into their balance sheet and looking over. We always say, try to give yourself twelve months to even two years to clean that all up and make your books show as much cashflow in the business versus taking it out for potential personal or for tax purposes. The biggest thing that we see is getting that prepared so you can get the highest value or multiple for your business and also show that potential buyer and the bank how much cashflow is truly embedded in the business.

There are a couple of things that peel back the onion on that. You talk about add-backs, a lot of people might not be familiar with that term. Maybe explain that a little bit more to our community.

When it comes to add-back, a bank is going to be looking at what are the sources of cash in the business. The add-back that a bank is looking at when we’re looking at how much money is coming through the business would be, if you’re selling the business, how much salary is the current owner or the seller taking? Do they have family members that they’re also paying salaries? Those are usually the easiest things to add-back because we can see W2’s and prove that those salaries won’t be as part of the new owners’ business. As well as we’re looking at certain things like the amortization expense in the business and depreciation interest.

Those are the main things that we’re looking to add back into our cashflow, but then there are the unforeseen or the not so typical add-backs that we’re looking at. That may be if they have a specific one-time expense that won’t be affecting the future cashflow of the business. They’re paying some of their children’s tuition out of it or if they’re paying some other large expenses not related to the business, such as large charitable contributions, tickets to sporting events. It’s a lot of items that you’re looking at and saying, “Is this going to be a need for the new person coming in and acquiring this business?” We also have to take in effect what is considered a true add-back that a bank can get comfortable with.

With acquisition financing, most transactions are going to have a large portion of goodwill or the intangible assets of that business. Click To Tweet

At the end of the day, what you’re trying to do is figure out what we call owner economic benefit. I know the words and the terms can get interchanged, but owner economic benefit, seller’s discretionary earnings, adjusted EBITDA, oftentimes those can be interchangeable terms. If you’re a seller of a business, having that number to be as high as possible and is provable as possible is important to achieving the highest value possible.

The ultimate gain is to make sure that we’re taking back all of those potential add-backs. The seller is looking to maximize the cashflow of their business for themselves, for their business and then when they look to sell, get as high of value or multiple for it. What we’re looking at is proof of those add-backs. We want to see a verification and documentation in order to, not just from an SBA and a bank’s perspective to build into our cashflow, but also from evaluation standpoints. We need to be able to find the documentation to support those add-backs.

The big thing is we call them questionable add-backs and sometimes when we say that it’s in regards to if all the personal expenses such as their cell phone bills, certain insurance bills, dining, travel, entertainment. A lot of those are hard to prove out even with documentation that it was for business purposes. Usually, we’re saying, “If we take those questionable or not verifiable add-backs out, do we still have cashflow off of the normal and customary add-backs?” That’s what we’re looking for.

When it comes down to the actual financial statements that the banks are relying on, you’ve got P&L’s and the balance sheets and the tax returns. When you’re looking at a deal and you’re underwriting, which financial statements mean the most to you?

What we’re looking at, not just from the bank’s perspective but also the SBA prudent lending requirements is we’re usually looking at the last three years of business cashflow. We’re looking at business tax returns. We’re also looking at the financial statements as far as profit and loss balance sheets, accounts receivable aging, payable aging. We’re taking in all that information. We’re matching up to see what we’re seeing on the taxes and what we’re seeing on the financial statements make sense from, “Are we missing certain add-backs? Are we not deducting certain expenses?” It gives the bank more clear analysis of the overall condition or health of that business.

If there’s a disparity between the internal statements and the tax return, does one trump the other at the end of the day?

It depends on bank by bank, but for the most part, we’re looking at the tax returns to start off on a historical basis. What you may see sometimes a discrepancy or you’re going back is if somebody is doing cash versus accrual accounting, a lot of times you’ll see that they have on their tax returns, cash basis tax return, and then their financial statements are accrual. It’s trying to understand that business and when they’re recognizing revenues and expenses and what years. That is one thing that we always look for and working with our borrowers and the seller. We’re making sure we understand the flow of cash in the business and when it’s received and when expenses are paid.

In our years of experience in doing transactions, the thing that we tell our clients is most banks at the end of the day are going to rely on your tax returns. When there’s a discrepancy, all things go back to what did you report to the government. Is there anything else from a seller’s perspective that you would advise them to pay attention to? Whether it be the financials or even beyond the financials, things that they need to be thinking about to make sure that their business is qualified for an SBA loan.

One thing I would definitely advise and recommend anybody who’s looking to sell their business is if you’re looking whether it’s a year or two years down the road, and that’s the plan to sell your business, make sure you get the right advisors and the right staff put into place to help guide you through that transition. When I mean advisors, working with your partners on the broker side such as Sun Acquisitions and Domenic who do a fantastic job of preparing clients to sell their business. We definitely recommend using your services to get the business prepared to sell. The reason that’s important is there are a lot of things that an institution or a partner advisor can prepare that business such as the financial reporting if there’s some advice on what you should be looking at to sell.

 

The biggest thing is everyone thinks their business is worth a certain dollar amount. Whether that’s high or low, you can have a partner come in and an advisor to tell you, “This is what the market looks like. Here are the multiple. If you’re looking to get X, here is how you need to get to that point.” Working with your advisors from the broker standpoint from an insurance and tax perspective and being truly prepared for that gain and that life-changing moment when you sell your business.

That’s great advice. To the M&A Unplugged community, this is a common theme, having the right set of advisors who specialize in M&A transactions can make your transaction much more profitable. You can maximize the value by having the right people involved to advise you every step of the way. Let’s shift over now to the buyer’s side. You’ve got somebody who wants to acquire a business and they’re going to come to you and try to secure a loan to make that acquisition. What should buyers be thinking about?

If they’ve identified and they see a potential business that they want to acquire, the next step is making sure to get the financing put into place. One thing I would always tell whether it was working with CIBC or another financial institution, make sure that the lender on the SBA side is a preferred lender and does a lot of acquisition financing. They know the structure that the SBA requires and the pitfalls and the good things that come with it. Make sure you’re working with a lender that knows how to put these transactions into place and to be eligible.

For people who don’t know, can you talk a little bit about there are preferred lenders and what else is out there? What’s the distinction that people should be looking for?

There are two types of lenders. There are lenders who can go through the preferred lending process, where they’ve done enough transactions in the SBA community. The SBA says, “We trust the decisions that you’re making. You’ve done enough and you know the eligibility and qualification standards. We’re going to allow you to make your own credit decisions in-house.” Rather than sending it in, which a non-preferred lender would have to send in their entire credit write up, all the documentation into the SBA, and get the SBA’s approval, which is another great resource. If you can go through a preferred lender, you don’t have to circumvent all of the SBA direct communication, you can work directly with that lender. They’re making the decisions, creating the authorization for approval through the SBA directly at the bank.

Are the benefits of doing that alone is going to be a shorter period of time to get the loan through approval and underwriting?

Correct. If you’re working on a preferred lending provider, they’re making their own credit decisions in-house. We’re also able to turn around from an approval standpoint. We’re going to the SBA through their online capabilities and they’re giving us an approval number. It’s almost instantaneous from the SBA’s perspective, from approval on a preferred lender status versus if you’re sending it directly into the SBA. Depending on the backlog, if there’s any government shutdown per se or any other backlogs involved, it could take potentially another 30, 40, 60 days depending on the workload directly at the SBA. You’re seeing an acquisition financing on average 45 to 60 days from start to finish on a turnaround time if you’re going through a preferred lender versus it could be potentially 30 days or longer depending on the workflow of the SBA if you have to go directly to them.

It’s such a good point because for our community out there, we always talk about how important speed is in deals. When you add another 30, 45 days, you add all sorts of time for other things to happen or go wrong. Adding that extra time could put your deal in jeopardy. You want to be definitely looking for a preferred lender. What else, as far as the buyer’s process goes for securing an SBA loan, would be important for people to know about?

The other important structural things to keep in mind when you’re looking to acquire is one of the reasons why you would look at SBA is equity contribution. The SBA and acquisition financing is looking for at least a minimum of a 10% equity contribution on the total proceeds of that transaction. It’s making sure that you have the equity, the funds available. The SBA is only saying that we need to be able to verify equity. That is one of the biggest pieces.

When you’re looking to sell your business, get it prepared to sell and try to see what the bank is going to be looking at. Click To Tweet

If you’re looking to acquire the business, make sure that 10% talking with your lender and getting that information, putting that somewhere where we can verify to statement cycles of all that equity that’s going in. The hardest part is if you’re looking to go around and try to find money from different areas and you’re getting close to close, that’s where things can get a little challenging and push the time back. You don’t have a lot of that documentation already prepared and ready for when you’re looking to get the financing.

Let’s put maybe some numbers around that. If you’re looking at a $2 million loan, what you’re saying is that people need to have at least $200,000 in liquid or readily available funds for that 10% of the total purchase price.

It’s not technically off of the purchase price, it’s off of the total proceeds. The nice thing with the SBA is they do allow you to build in all your closing costs and third party costs. Any fees associated with the transaction can be built back into the loan. Once you build that all into that total project, the SBA says, “We want you to have 10% of that total project cost.” Let’ say it’s a $2 million purchase price and then there are some other fees involved in there. They’re saying, “Take whatever that total loan amount is or total project costs and we want to see 10% equity.” If you say a flat, everything all in is $2 million to your example, yes. Make sure you have around $200,000 in liquid cash, whether marketable securities in your savings, your checking and 401(k) that can be pulled out and rolled into the business. Those are things that you want to make sure you’re ready for the preparation of that equity contribution.

Let’s talk about a few other things as it relates to buyers. How does transferrable experience or relevant experience play a role in how you underwrite these SBA loans? What collateral or security does a buyer expected to provide on an SBA loan?

One of the big things that the SBA has as part of their required documentation and also from a bank’s prudent lending practices is looking at the transferrable or relatable experience of the new buyer coming into that business. What the SBA is looking for is, what skills or direct industry experience does that person coming in to buy that business have in order to make sure that it’s a successful transition and that that new owner will be successful? Meaning, let’s say you were in the technology world for twenty years and then you wanted to own a pet store. You don’t have those transferable skills. The SBA is going to say, “Why did the lender give you financing?” If the business fails, they’re going to see that there wasn’t a direct correlation to those skills transferring over to the other business.

You need to be able to look if you’re acquiring a business, do you have management skills? Have you run a business? Do you currently own a business that you can say, “I’ve taken from management top-down and I can do the same thing into this new type of industry?” If you have direct industry experience, that’s even more preferable saying, “I’ve been in this business for the last five, ten years and I can directly translate to me running this successful business in the future.” That’s always a key in making sure that you have that experience and that we can state that case to the SBA why you’re a qualified potential borrower.

To answer your second part in regard to the personal collateral, even though the SBA program allows, it could be potentially 100% collateral shortfall on the loan, the SBA does require lenders to at least attempt to fully secure the loan. Once we look at all the business assets and we build that into our total collateral pool. If there’s still a shortfall from a collateral standpoint, the SBA then requires us to go to our personal guarantors. Anybody who has more than 25% equity in their personal residence, where they’re primary or investment and they’re 100% owner of that piece of real estate, we’re required to take that and pledge that as additional collateral to the SBA as per their requirements.

A buyer needs to understand that they’re going to have to sign a personal guarantee. To the extent that they have other hard assets, real estate or whatever, they’re going to have to pledge that if there’s a collateral shortfall.

The SBA determines from a personal guarantor that anybody who has more than 20% ownership in the company will have to be considered a personal guarantor. Other people can offer the guarantee if they would like to, but that’s the minimum of the SBA. When we say hard assets, it’s truly real estate. Years ago there was a requirement and a personal liquidity test that if you had other cash, marketable securities, and CDs you are required to pledge it. They had taken that away to where now it’s specific to personal real estate.

 

On this personal guarantee issue. Let’s say you had three owners and each held 19% of the company and the third partner had the balance. Those two that have less than 20% would not have to provide personal guarantees and only the person with the majority would have to guarantee the loan?

According to the SBA SOP, which is the standard operating procedures, the requirement is anybody in more than 20% or higher is required to personally guarantee. Technically, those individuals under 20% are not required. One of the things that the SBA does say in cases where it looks like you’re putting individuals under that level in order to avoid personal guarantees, the SBA could then say, “You need to add them as personal guarantors.” In most cases, if you are under 20%, you are not required to personally guarantee. I say that because it is a case by case basis in certain circumstances but for the majority 20% or more, you were definitely putting your personal guarantee on there.

Is there anything else that you would advise buyers to understand as it relates to securing an SBA bank loan?

The one other thing I will say and going back to the equity standpoint. When we’re looking at transactions up to $5 million for the SBA lending, the equity contribution of 10% can be significant. In a lot of transactions, what we even see is a 10% equity. Let’s say you’re looking at a $5 million transaction total project cost and $500,000 is that minimum requirement. Maybe the buyer is a great fit. It makes sense from buyer and seller, but they don’t have that full 10%. One thing to keep in mind, with that 10% equity, there’s a rule within the SBA that you can split that up. Meaning the borrower has to put a minimum of 5% of their own cash equity into the transaction. The seller could in turn on that remaining 5% put up a seller notes as part of the equity contribution to make up the remaining 5% or get to the full 10%.

The one caveat of that 5% if it’s seller financing, it does have to be on full standby for the life of the loan in order to count towards that equity. We have been able to get some transactions. We did a transaction where the purchase price was $6.8 million, which is well above that SBA threshold. We did around $4.8 million on SBA notes. We had 5% equity coming in from our borrower, we had 5% coming from the seller on the full standby for ten years and there was a remaining second seller note that had normal payback terms that allowed for cashflow to support it of around $1.7 million or $1.8 million. That allowed us to do a larger transaction. It’s not just small transactions and it still fits into the SBA mold and to hit all the different parameters and eligibility requirements of the SBA.

That borrower got into that $6.5 million deal for $250,000 of equity?

Roughly around that.

You used a term here. I want to make sure that everybody understands this because it’s a term that I don’t think people hear a lot. You used the terms standby as it refers to the seller note. The buyer or borrower put in 5% equity cash into the deal and the seller took back a 5% seller note, then you used the term standby. Can you explain that?

When we say standby, it means that there are full standbys that the SBA requires as part of the equity. In full standby means that there are no principal or interest payments allowed on that seller notes for the life of the loan. You’ll see a ten-year full standby seller note. It means no payments to the seller for ten years or until the SBA note is paid in full, then they’ll allow for payments on that remaining loan amount.

Why is that a requirement for the SBA?

When selling your business, the most important is being truly prepared for that gain in that life-changing moment. Click To Tweet

The reason the SBA put that into place is a few years they had in place where depending on the goodwill amount of the transaction, a lender in order to do it on preferred lending status had to have a 25% equity injection as part of the transaction. The problem is there was a lot of seller financing involved and equity that was coming from the borrower. It got confusing and there were a lot of gray areas. They eliminated that a few years ago to where it was 10% minimum equity contribution. We would like to, as a bank, in most cases and the SBA have 10% fully by our borrower. In order not to limit certain strong situations where there are a great buyer and seller synergy there is allowing this seller financing to make up for that other 5%. As long as there are no payments on it, the SBA considers that true equity because it’s not borrowed funds. It’s true equity that’s not paid until after the loan is paid off.

I would imagine this term if we have any potential sellers out there that are reading. You’re thinking, “I’ve got a seller note that’s sitting out there and I can’t receive any payments for ten years.” I want to make sure you understand that. That is only when the buyer is not putting up 10%. If the buyer we’re putting up 10% of the total loan and you had a seller note, you can receive full payments on that seller note from day one. It’s only when your seller note is a part of that borrower’s initial 10% that you’d have to be on standby. I don’t want potential sellers out there to be thinking, “I would never allow a buyer to go to the SBA and secure a loan that way.” That’s not the way most loans are done.

Most loans aren’t done in that case. I usually throw that out there as a one-off and there are different structures if you still are trying to get a deal or an opportunity transaction completed. There are ways to do it outside of that 10%. A majority of probably 90% plus of all transactions, the buyer is coming in with the 10% minimum. In a lot of cases, there still is seller financing as part of that transaction. Probably about a good half of the transactions that we do still have seller financing outside of that 10%. As long as the payment terms and analyze that into our cashflow, as long as the cashflow isn’t hurt or it supports it, you can set up the seller notes with however you want to structure outside of that 10% to allow for payments sooner or with different interest rates and amortizations on that.

Looking at that structure and deal that you described with $6.8 million. It sounds like everybody got creative and hopefully, it was a good outcome for everybody. It’s certainly creative on the bank’s part to be able to pull a structure together like that.

The great thing about the SBA program is there are guidelines and structure and eligibility that we absolutely have to follow. There’s a lot of flexibility that the SBA gives us in those rules especially from acquisition financing to allow the small business community and small business borrowers to acquire businesses without either having to put all their cash into the transaction or having to do all seller financing. We even see a lot of more middle-market private equity that’s coming down into this space. It allows a buyer to come in and acquire a larger business without having to give up ownership interest as well. It is a good tool and still allows borrowers to come in and to acquire a business and getting a loan based on cashflow lending and not asset lending.

We covered a lot of ground and this is great information. I’ve been doing this for a long time and have gotten over 300 M&A transactions under my belt. The one thing I know for sure is when it comes to SBA lending, if you don’t have pros involved in the transaction, you are in trouble. I consider Paul to be one of those people. You and CIBC have been wonderful partners in the transactions that we’ve been able to do together. You guys know what you’re doing. You’re always looking to see how you can help the parties get the deal done. You’re creative, responsive and it’s been a real pleasure. Paul, is there anything else that you think from an overarching perspective that you would advise, whether it be a borrower or a seller about the SBA? Is there one key takeaway that you think is important to pass along?

From both buyer and seller, one thing to take away is if you’re looking to sell make sure that you’re preparing and you’re putting in the time, whether it’s 6 months to 2 years, to get your business ready to sell and working with your advisors. Likewise, on the borrower side, make sure you’re working with your team at advisors, preferred lenders, attorneys and accountants to make sure that the transaction makes the most sense for both parties involved. You’re looking and putting a lot of thought into it and working with the right advising team.

Thanks, Paul. One last question I’m asking all of my guests, it doesn’t have to be a business book, but is there one book that you’ve read that resonated with you and made a difference for you in your life?

From a business standpoint, one book that I can go back and relate to is 7 Habits of Highly Effective People by Stephen Covey. It’s one of those books that you go back as a refresher if you get caught up in your daily world whether it’s personal or business. It’s always good to read and see that you need to be more proactive. You need to put your goals ahead of other tasks that aren’t going to get you to be as most effective as possible. It’s prioritizing whether it’s your work or your personal life and coming to a place where every day you’re doing the things that make the most sense for you to grow as a person, as a business person and be effective and successful.

 

I remember that book. I remember reading it. What a franchise that became. There was a whole franchise that spun off of that. I remember there was a Day-Timer System that came out of that. I used that for a while back in the ‘80s or ‘90s. It’s a great book.

It’s 25-plus years of experience.

I wonder how long it was on the New York Times Bestseller list too. It seems like that thing was on the bestseller list for the New York Times forever. You opened up your paper every week and it was like, “There it is again.”

It’s funny because you read the book and you read the terms. It’s the stuff that we all know but it’s always good to see it from a fresh perspective or even an old perspective and correlate it to your life, business and on a personal level.

Paul, I appreciated having you here. This subject matter can get intense and technical. I’m glad that we have people and bankers like you that can help people through the process. If people want to get in touch with you and have questions about SBA loans, how can they reach you?

The best way would be either through phone or through email. My direct telephone number at the bank is (630) 488-3007 and my email is [email protected].

To summarize a couple of the key highlights that we had. SBA loans can make a lot of sense in the right cases. Some of the attractive elements of an SBA backed loan are clearly the term ten years. Sometimes when you have real estate with the loan, you can take the loan out for the business and the real estate even for a much longer period of time. The fact that you can finance goodwill. You can’t do that in a conventional loan in many cases. With the SBA, they’ll do a lot of goodwill. It’s a great way especially for service-based businesses or businesses that don’t have a lot of assets and the majority of the value is in goodwill.

From a buyer’s perspective, the fact that you can get into an SBA loan for such a small amount of equity injection, as small as 10%. These SBA loans can be beneficial for both the buyers and sellers. I highly recommend that you engage the right advisors and talk to the right people. For sellers, it’s important to make sure that your business from a financial and operational perspective is prepared to go through the scrutiny of the approval and underwriting process.

For buyers, make sure you’re paying attention to your background. Do you have relevant experience? Do you have the cash infusion? Do you have the right team? You always want to be looking to work with a preferred lender if time is of the essence and in most deals it is. We thank Paul for being with us. If you would like to learn more about the process of acquiring or selling a business, please visit our website at SunAcquisitions.com. Feel free to reach out to me a [email protected]. I look forward to seeing you in the next episode of the M&A Unplugged podcast. Until then, please remember that scaling, acquiring or selling a business takes time, preparation and the proper knowledge.

Important Links:

• CIBC
• Sun Acquisitions
• 7 Habits of Highly Effective People
• [email protected]
• SunAcquisitions.com
• [email protected]

About Paul Liles

I am the SBA Banking Manager with CIBC. I help entrepreneurial companies secure business loans and generate more cash to continue growing and operating when conventional financing isn’t readily available.

For example I recently helped facilitate a partner buyout for a 40 year old manufacturing company. As a Preferred Lending Partner of the SBA, we were able to not only complete the 100% ownership change, but also increase company cash flow and finance new equipment.

If you have any questions regarding SBA loan programs or ways I can help your company grow and increase cash flow, please contact me at 630-488-3007. 

• Here’s How »

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