SBA Loans 101: What Small Business Buyers and Sellers Need to Know
While there are misconceptions about Small Business Administration (SBA) loans, it’s important to understand the comprehensive advantages of the government-backed loan program. Some believe that they have a lengthy process and overly strict eligibility requirements. However, these misconceptions usually stem from businesses working with lenders that are not part of the Preferred Lender Program (PLP). Lenders with PLP status have the authority to make final credit decisions, which simplifies and speeds up the loan process.
In reality, SBA loans can benefit small businesses in many ways. In this article we will dive into what an SBA loan is, the top two SBA loan programs, their benefits, SBA rules and the lending process.
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Small Business Acquisitions: What Assets are Typically Included in an Asset Sale?
Recently, I’ve had several discussions with potential buyers regarding business acquisition deal structure. There seems to be some confusion regarding what assets are included in a typical “Asset Sale”. This article is my attempt to help alleviate this misunderstanding.
Small, privately owned businesses are typically sold as asset sales as opposed to stock or equity sales. Small is relative depending upon the industry the business operates within according to the Small Business Administration (SBA). For some industries, under 500 employees is small. For others it may be up to 1,500 employees.
For example, if you own a Chicken Egg Production facility (NAICS code 112310) your business could have up to $16.5 million in revenue and be “small”. If you own a Sewage Treatment Facility (NAICS code 221320) with revenues up to $31 million, your business is considered small. To determine size eligibility and other factors, an SBA lender will check the list to see if the business qualifies to participate in the SBA lending program.
So, whether it’s a local diner generating $300,000 annually in revenue or manufacturing firm with 500 employees, both are considered small according to the SBA. Generally, these privately owned companies are sold as “asset sales”. Although the larger of the small ones, may be sold as an equity or stock sale. Again, it depends upon the needs and desires of the buyer and seller and the deal structure that is preferred.
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