It’s a question I get all the time: how long will it take for the SBA financing to come through? The answer depends on the effectiveness of your broker, your lender, and a whole group of other professionals. Here’s how I make the process as efficient and short as possible.  

My experience in the industry means I can identify and head off issues that could derail a deal. I invest the time up front to prequalify the business and the seller with the SBA lender. Banks are simply not interested in risk, so I make sure the lender has all the information it needs to know that the business is on solid ground. This eliminates the back and forth of requesting and providing more information during the sale process.

My experience also helps me pre-qualify buyers. If you’re working with a broker who doesn’t know your industry well, they may not know about issues that will cause a deal to fall through. HVAC buyers must hold a trade license, for example, so it’s something I always ask about up front. You’d be surprised by the number of prospective buyers who haven’t been asked about licensing before our discussion. I’m not going to waste a seller’s or buyer’s time working on a deal that isn’t feasible, so the work I do up front saves us both time and money later on.

Your broker should also have relationships with lenders who understand the industry and have a sense of urgency about getting deals done. I only work with lenders I know well and who have the resources to make deals happen. There have been times a seller wanted to work with his hometown bank, but not every banker has the experience or knowledge to understand the deal. If that’s the case, I have to spend time educating them about the HVAC industry, the trade itself, and the company’s business model, which can slow the process down considerably. A more experienced lender might be the better choice when you sell your business.

Even with all this work in advance, I tell sellers it will take between 45 and 60 days to secure the funding. I sometimes get pushback from sellers who’ve been told it can take as little as 30 days to close a deal. That’s simply not realistic, and here’s why.

The lender has to verify all the documentation we’ve put together; they’ll order independent appraisals of the company’s assets, the real estate, and any collateral the buyer is offering. Those take time to schedule, especially when real estate is hot, as it is right now. They’ll also want updated financials to make sure the current cash flow is adequate to cover expenses, the buyer’s salary, and service the debt of the loan.

By the way, that’s why it’s important to stay engaged in the business and not take your foot off the gas once you’ve identified a potential buyer. If the company’s cash flow starts to decline during the sale process, a lender might decide to pull out of the deal. (The same is true for the buyer.)

SBA lenders pull tax returns for the seller and buyer directly from the IRS (you’ll be signing form 4506-T), which can take time, since the IRS is often backed up on requests. If you’re trying to do a deal in February, March, or April, it may take even more time, since your returns may not have been processed or entered into the system yet.

With all these moving parts, you can see why it will take time to collect and verify all the information. That’s why I make sure SBA lenders I work with have a network of reliable, professional, and motivated vendors who will get all these documents in place quickly. 

But we won’t be sitting idly, waiting for the lender to gather data it needs. The buyer and seller will be doing due diligence and working on getting ready to transfer licenses, leases, and other agreements that will move from the current owner to the new owner after the sale. 

Selling your business is the most complicated transaction you’ll make in your lifetime. It’s much more complex than selling a home, which almost no one attempts on their own. The right broker will not only help you find the right buyer, negotiate the best price for your company, but also help you navigate  – and speed up – the process of securing the funding. 

 

About the author: Patrick Lange

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Patrick Lange is an experienced HVAC-specific business broker with Business Modification Group based in Horseshoe Beach, Florida. He has a unique background in financial planning and has even owned an HVAC business himself. This makes him well suited to working with some of the most successful HVAC business owners in the country. Specializing in companies with 1-10 million dollars in revenue, he maintains a network of buyers and sellers in the industry. He has sold more HVAC businesses than any other broker in the United States over the last three years and is currently the President of the Business Brokers of Florida (North Florida District.)