Buyer Broker Services
We Research & Find the Right Business for You
You have decided to live your dream of owning your own business. Or you already own a business and have decided to grow by making a synergistic acquisition. Now you have enthusiastically embarked on finding just the right business to accomplish your goals. You go to all the “Business for Sale” websites, you study multiples of cash flow being asked, you make lists of likely candidates, you visit with brokers, sign Confidentiality Agreements, meet with some owners.
But with each business there is always something that is just not right for you, something that keeps you from pulling the trigger. Before long the search becomes tedious and time-consuming. You are frustrated and feel that there must be another way to achieve your goal. Sound familiar? Well, there is another path. Consider engaging CBB to perform a buyer search for a business that fits your criteria.
Contractual Advisory Buy-side Representation Services Include:
- Gathering, analyzing and assessing your acquisition criteria
- Developing potential target lists
- Contacting & screening potential acquisition candidates
- Facilitating the exchange of information between parties
- Advising and assisting you in meetings and negotiations as necessary
- Valuing target companies
- Negotiating the deal
- Coordinating due diligence and closing process as required
- Locating applicable financing
When you engage us to perform a buyer’s search, we do not focus on businesses that are actively listed for sale. Many owners would like to sell to a qualified buyer but do not want to list their business because they are concerned that customers, employees and suppliers would find out and the business would suffer. These companies are often referred to as the “hidden market.”
It is estimated that there are four times the number of businesses on the hidden market as there are businesses listed for sale. We search for these hidden market companies to develop a potential target list. With a buyer search, the chances of finding a business that meets your specific requirements improve significantly. There are several critical pieces of information that you need to provide in order to begin the buyer search process.
What Our Business Brokers Need to Search the Hidden Market for Businesses for Sale
- Clear and specific requirements for an acceptable acquisition – we need to know the industry, size, location, minimum cash flow, and total equity capital you have available to invest
- Your resume which shows your qualifications for managing a business in your target industry
- Indication of financial capability – such as a letter from your banker or an account statement showing your access to liquid capital.
Armed with this information, we can make a compelling case that you are a serious, capable, qualified buyer when we contact the companies on the target list.
OK, you say, sounds interesting — but using this process means the buyer pays the broker fee instead of the seller. That is true, but ultimately is it going to cost you more money to make the acquisition? Probably not. In a transaction where the seller pays the broker fee, the source of the funds for that fee payment is the purchase price paid by the buyer. The seller makes the decision to accept a certain purchase price based on the net proceeds received after paying fees. So whether the buyer or seller is responsible for the fee, the purchase price and seller net should be the same.
If you want to save your search time, access the hidden market, and relieve some frustration, consider using our buyer search services. Take a different path — start by registering as a prospective business buyer or arrange a meeting with our business brokers to discuss how we tailor the process to meet your goals.
Business Buyer Steps
1: BUY WHAT YOU KNOW
You have made the decision to control your financial future by purchasing a business. Owning a business is the greatest way to build wealth and take charge of your own destiny. Congratulations for contacting Certified Business Brokers (CBB), you’ve selected the best in the industry! Now the process begins to help find and acquire the right business for you.
2: COLLECT INFORMATION ON YOUR FINANCES, SKILLS, EXPERIENCE & BUSINESS GOALS
We begin our process by gathering information about you to establish your financial capabilities, your skills and experiences, and your personal goals. This information helps us gain your commitment to the process and enables us to competently assist you in your acquisition search. It is important to recognize that lenders, landlords and others who will be a party to your eventual business acquisition will also require personal and financial information. Prior to discussing confidential information about businesses for sale, we require prospective buyers to complete a Confidentiality Agreement, (also known as a Non Disclosure Agreement), that protects the interests of the business owners during the sale process.
3: REVIEW BUSINESS LISTINGS FOR SALE
Based on your qualifications and acquisition criteria, we will review with you several businesses for sale in Texas that potentially meet your needs. Should you indicate an interest in one or more of these businesses, you will be given the Business Profile that describes the business, its market, assets, financials, and price and terms of the sale.
4: MEET THE SELLER AND TOUR THE BUSINESS FOR SALE
Once you have reviewed the information on the Business Profiles and we have answered your questions about the businesses, the next step is to meet with the business owner and visit the facilities. We will schedule all appointments with the business owners. It is common for business owners to require that all such meetings be during non-operating hours to avoid premature disclosure to employees and customers. We will attend these meetings with you to introduce the business owner, and facilitate the flow of information.When meeting with a business owner, you may tour the facilities and ask questions regarding the operations of the business.
Questions pertaining to the price and terms of sale are NOT appropriate topics to discuss at this meeting. We are the liaison between you and the owner regarding the basis on which the business was valued and the terms of sale required by the owner. Remember, you signed an agreement to keep all proprietary information you obtain about the business confidential. Only discuss this information with your professional advisors and spouse and remind them that the information is confidential and not to be disclosed to other parties. In most cases, the employees, customers, suppliers, landlords and lenders are not aware that these businesses are for sale. Premature disclosure could have a negative impact on the business being sold.
5: MAKE AN OFFER TO BUY THE BUSINESS
At this point you have reviewed operating information and financial summaries of the businesses that meet your acquisition criteria, and you have met with the business owners and toured their business facilities. When you select the business that best meets your needs, you are ready to make an offer.
Since, the inspection period, known as due diligence, can be very time consuming for both you and the business owner and costs may be incurred for such things as professional advisors, copies of documents and records, the business owner does not want to go through a detailed due diligence process without knowing the buyer is serious and willing to pay an acceptable price to purchase the business. Therefore, before copies of tax returns and other business documents can be obtained, and before any contact with landlords, bankers, suppliers, employees, or customers, an Earnest Money Offer or Letter of Intent (used for larger businesses) must be presented and accepted by the business owner.
An Earnest Money Agreement provides the terms and conditions under which you are willing to buy the business and the seller is willing to sell the business. If real estate is included, a separate Earnest Money Agreement will be completed for the property.
The amount of earnest money required to be submitted along with the Earnest Money Agreement will depend upon the size of the business transaction. The amount needs to be sufficient to show your serious intent to buy the business and to encourage the seller to take the business off the market while you complete your due diligence. For most small to midsize businesses, earnest money of $5,000 to $10,000 is typical.
We will facilitate the negotiations between you and the business owner to secure an Earnest Money Agreement that is acceptable to both parties.
6: DO YOUR DUE DILIGENCE ON THE BUSINESS FOR SALE
The Standard Earnest Money Agreement gives you up to 15 calendar days to perform due diligence, which is the period where you fully inspect the owner’s representations and verify their accuracy. You can review the business financial documents, operating agreements, property leases and other aspects of the business after the earnest money offer has been agreed upon and signed into contract by you and the business owner.
During the due diligence period, we will coordinate your request for documents and assist in arranging meetings with related parties to the transaction including the business owner’s professional advisors, your professional advisors, the landlord, lenders, and others as needed.
If institutional financing is required, we can recommend various lending sources depending upon the type of financing needed.
7: COMPLETING YOUR BUSINESS PURCHASE: HOW ESCROW AND THE CLOSING PROCESS WORK
When you have completed your due diligence and are satisfied with all aspects of the business, you will authorize an escrow attorney to conduct lien searches, prepare closing documents, such as a bill of sale, note and security agreements, closing statements, and non-competition agreements prior to closing for all parties to review. Final preparations will be made for lease assignments, utility transfers, financing, merchant service accounts, inventory counts and any other last minute preparations to make the transfer as seamless as possible. After the closing documents have been approved by the principals, a closing date will be scheduled. A cashiers check will be required at closing for the amount due. We will coordinate with the principals and their advisors, landlord, lender, and others, to insure that all the necessary paperwork is completed prior to the closing date.
Why Buy an Existing Business
The main benefit of buying an existing business is all the legwork has already been done. Getting a business off the ground is often the riskiest and most difficult stage of any new business venture. It is safer and more profitable to buy an existing business than start a new one. According to the Small Business Administration, more than 50% of startup businesses fail due to unproven concepts, lack of working capital, and poor management.
Some other advantages in acquiring an existing business include:
- The ability to review a company’s existing track record substantiated by profit / loss statements, tax returns and other financial records.
- Growth potential can be measured based on actual experience rather than conjecture associated with startup ventures.
- The need for additional working capital is reduced due to the immediate cash flow already being generated by established customers.
- Skilled employees who are familiar with the business operation are already in place.
- Existing licenses and permits can often reduce the time and cost of making application, gathering information and conforming to required regulations.
- Location / demographics have already been market tested & proven.
- Pricing and competition are already known quantities.
- Policies and procedures are in place.
- Established suppliers / vendors are already in place.
- Established relationships with professional advisers, insurance companies, advertisers.
- Furniture, Office Machines & Communication Equipment are in place.
- Established market presence, such as a website, is already in place.
- Sources of capital to purchase existing businesses are more readily available than startup ventures.
Financing Information and Options
The US Small Business Administration (SBA) enables private lenders to make loans for buying a business that they ordinarily would not be able to make by guaranteeing that a portion of the loan proceeds will be repaid to the lender in the event of a default by the borrower. Among many other uses, SBA financing is the primary vehicle through which small business acquisitions are financed.The two loan types that are most commonly used are the 7(a) and 504 loans, which are discussed briefly below.
The 7(a) loan is the most commonly used type of SBA loan due to its versatile nature. Proceeds from a 7(a) loan can be used for nearly any legitimate business purpose including buying a business, real estate construction and acquisitions, debt refinance, business expansions, business startups, equipment and working capital. The term of a 7(a) loan is dictated by the use of proceeds. Prepayment penalties are non existent for loans with maturities of less than 15 years, and are extremely lenient for loans with longer maturities. Interest rates are nearly always variable and based on a spread over the Prime Rate.
The 504 loan program is intended solely for real estate and fixed assets such as heavy equipment. 504 loans are unique in that they provide for maximum leverage (up to 90% loan-to-value) with favorable terms including maturities out to 25 years and relatively low interest rates which can be fixed for the life of the loan. 504 loans are also unique in that they allow for loan sizes up to $5,000,000 (greater in some instances). The structure of a 504 loan is different from that of a typical loan in that it is a combination of two separate loans. The first loan is a 50% conventional first mortgage that is not guaranteed by the SBA, and the second loan is a 30% – 40% second mortgage made by an independent non-profit entity known as a Certified Development Corporation, or “CDC”. The CDC portion of the loan is 100% guaranteed by the SBA.
The Process from Start to Finish
Many lenders can make SBA loans; however, very few actually make SBA lending a priority. When seeking SBA financing, it is important to determine that you are dealing with a lender who maintains the coveted PLP designation. These lenders are known as “Preferred Lenders”, and have the ability to originate, process, and close SBA loans much quicker than their counterparts who do not maintain a PLP designation. Qualifying for a SBA loan is straightforward and simple. The information that your lender will need to review in order to tell you if you qualify varies from transaction to transaction; however, the following list of information will be sufficient in most instances to obtain a financing proposal from your chosen lender:
- Business Tax Returns for last 3 years
- Current Year Interim Financial Statements
- Schedule of Existing Debt related to the business
- Background on Business & details on real estate if applicable
- Borrower’s Personal Financial Statement (SBA Form 413)
- Credit Check on all guarantors
- Borrower’s Resume or information on the borrower’s professional experience
- Information pertaining to any other businesses controlled by borrower(s)
A financing proposal is a non-binding letter that outlines the terms under which a lender would be willing to loan money and provides an estimate of the costs associated with the loan. Once you obtain a financing proposal from your chosen lender and agree to the terms of the proposal, your lender will typically need to collect the balance of the information needed to underwrite the loan as well as an underwriting fee or “packaging fee”. Most PLP lenders are able to underwrite a loan request within 1 to 3 weeks. After the loan is underwritten it will be submitted to that lender’s credit authority for approval. If the loan is approved, a commitment letter will be issued to you, typically within 24 hours. The commitment letter is a binding letter that outlines the lender’s intent to fund a loan under stated terms and conditions. Most lenders will require you to submit a loan deposit with your signed commitment letter. The deposit will be credited to closing costs and third party fees incurred by the lender, such as appraisal costs.General time frames for closing an SBA loan after a commitment letter is issued, signed and returned with the deposit range from 3 weeks to 45 days.
There are numerous variables that affect the time it takes to close an SBA loan, including but not limited to real estate considerations, construction requirements, and business valuations and / or real estate appraisals. The best way to control the closing time frame is for you, the borrower, to respond to your lender’s requests for information in a timely manner.
Three Guidelines for Financing a Business Acquisition with a SBA Loan
- Cash Flow is King! All business acquisition loans are evaluated based on the historical cash flow reported in the business’s tax returns. The performance of the business subsequent to the most recent year’s tax returns is important, but your lender will be relying heavily on the cash flow reported in the tax returns to ensure that there is sufficient cash flow to repay the loan. Your lender will also be evaluating your personal financial situation to understand what your personal debt obligations are and how much money you need to withdraw, if any, from the cash flow of the business. Businesses with minimal or even negative cash flow can often still be financed if the borrower has a favorable personal financial situation.
- Experience is Important! Your lender will want to know why you are qualified to own and operate the business you want to buy. If you don’t have experience owning, operating, or working within a similar type of business, you will need to make a strong case that you have professional experience that is “transferable” to your target business in order to qualify for SBA financing.
- Create a Business Plan! Even borrowers with extremely strong industry experience will be asked, at a minimum, to create financial projections that reflect the borrower’s estimates of revenues and operating expenses after the business is purchased. Many lenders will require all borrowers applying for a business acquisition loan to provide a business plan, regardless of experience. Borrowers with less impressive resumes can attempt to mitigate their lack of experience by providing a thorough, comprehensive business plan that shows the lender they have completed a substantial amount of due diligence on the business being purchased.
How much money do I need to buy a business?
Different lenders will require different amounts of cash equity to be injected into the purchase of a business. Most lenders will view the amount of equity required in terms of a percentage of Total Project Cost. Total Project Cost is equal to the sum of (a) the borrower’s cash injection, (b) the amount of debt offered by the lender, and (c) the amount of any 3rd party financing obtained in conjunction with the transaction (such as a seller note). Total Project Cost will usually include closing costs. Most PLP lenders will require between 10% and 25% of the Total Project Cost to be injected into a business acquisition by the borrower. Some factors that will typically decrease the required amount of borrower equity include:
- Real estate included in the sale. If real estate is included, “general-multi-purpose” (such as an office building or warehouse) is preferred, as opposed to “special-use” (such as a car wash or marina)
- The borrower has a secondary repayment source for the loan other than the business purchased (such as a spouse or co-borrower with outside employment)
- Other collateral available to pledge (such as a rental property or securities)
- Significant industry experience or transferable experience
- The seller of the business carries a seller note
- The business has strong historical cash flow
In general, it is difficult to approximate the exact amount of equity a lender will require without having a conversation about the above issues. However, most business acquisitions that don’t include real estate will normally require at least 20% cash equity. In some cases lenders may approve a loan to a borrower who is injecting less if the right factors are in place.
Prospective Buyer Registration
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Buyer Required Forms
Buyer Confidentiality Agreement & Other Required Forms
Instructions:
- A Confidentiality Agreement is required each time you wish to review confidential information about specific businesses for sale. All other forms are only submitted once, when you first register with us.
- There are 4 forms shown below. You may choose to complete the ONLINE version of the required forms or the PDF version of the documents. However, the Information About Brokerage Services form is only available as a PDF.
- Fax PDF forms to 267-217-6088 or email them to us here.
- All ONLINE forms are SSL protected for your security.
Buying FAQ
Buying or selling a business can be a complicated venture. While some businesses are sold without the help of accountants and attorneys we strongly recommend that both the buyer and seller engage professionals.
The E-2 process is quite complex. We have sold many businesses that required the E-2 visa. We have an E-2 visa attorney on staff or we recommend an outside consultant that specializes in obtaining visas. In additional, several of our agents have done E-2 transactions and can provide enough help to move you along the process.
CBB is generally paid by the seller not the buyer. However, other costs do come into play. Legal and accounting expenses may be incurred during due diligence should you employ professionals to assist you. Closing costs will be incurred at closing.
Depending on the complexities of the business, the former owner will offer varying levels of training. On most small businesses the owner will offer training for two to four weeks at no cost to the new owner.
As part of the acquisition process you will have to go through “due diligence.” During this period the seller is required to present documents to verify his profit numbers as well as any other information you request.
In most instances, no, While 100% of the purchase price is sometimes required, sellers will frequently provide owner financing to some extent. Additionally, a bank may be able to loan up to 80% of the purchase price through a loan sponsored the Small Business Administration (SBA). The business must meet certain criteria to qualify for SBA financing and the buyer must meet certain standards as well.
Businesses vary a great deal in price. The higher the amount of down payment, the more likely you will be in finding a business that meets your needs.
Get In Touch
1250 Bethleham Pike, #101
Hatfield, PA 19440
(267) 217-6088
info@nexusbusinessassociates.com