The SBA has just released a new procedural notice that opens the door to asset sales for partial changes of ownership acquisitions in SBA 7(a) loan program. This is a game changer for both buyers and sellers of HVAC businesses. I have written about this before; previously, if a buyer did not have an HVAC license and planned to use SBA funding to purchase the business, they were out of luck. The new SBA rules now allow sellers to remain involved as employees or consultants indefinitely.
I have had dozens of conversations a week over the past couple of years, disappointing many potential buyers who wanted to get into the HVAC industry. Licensing was a big barrier, preventing newcomers to the industry from becoming owners. In many states, it can take years to obtain a license: completing a training program, passing the exam, spending years in the field, and getting experience as a foreman.
This rule change, which is effective immediately, reverses the rule that prevented a seller from remaining in a key role after the sale of the company. The SBA rule change enables buyers to structure a deal as an asset sale and allows sellers to retain an equity position in the new company. The new asset sale structure works if there is a clear path to the buyer getting the license and other options the buyer has identified if the seller decides they no longer want to license the company.
For sellers, this opens a large and motivated pool of buyers who previously could not qualify for SBA financing in the industry. It eliminates the need for a stock sale, which presented considerable liability risk and fewer tax advantages for buyers.
Being able to stay on in the business is good for the seller, the staff, the customers, and the brand, especially if the company has been linked to a strong, visible, and reputable owner. The new owner buys time to learn the business while ensuring smooth operations. And the new owner has time to develop a plan for transitioning to his own license or hiring a licensed general manager.
Business Modification Group currently has thousands of potential buyers in our database who will want to take a look at profitable HVAC companies. If you’ve been thinking about selling or looking for an infusion of capital, this could be your year.
