How Business Valuations Drive Smarter Lending Decisions This article provides a case study that highlights the methodology behind SBA-compliant business valuations. The article underscores the importance of grounding the analysis in standard valuation techniques, using reliable industry benchmarks, and properly documenting adjustments. The role and value of business appraisers to the lender and parties involved in a potential SBA-financed transaction is also discussed. Business valuations play a vital role in SBA financing. For both 7(a) and 504 loan programs, an independent business valuation is typically required in the following situations: The total financing amount (including SBA loans, seller financing, or…
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A Five-Step Process to Secure Debt Refinancing For anyone dealing with a company that has a troubled balance sheet, maintaining cash flow is critical to determining an optimal go-forward approach. In many cases, the go-forward involves a transaction such as a merger or sale. But, to get to that point, a stressed or distressed company must maintain the liquidity it needs to continue running the business while positioning itself to satisfy its debts—often to a primary lender—and proceed with the intended transaction. Preparing your company for non-traditional debt financing is a lot like online dating. You need to like what…
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Getting to the Finish Line is Exhausting In this article, the author analogizes the sale of a business to how one prepares and runs a half marathon. Many business owners may treat an exit as a half marathon, but that is a mistake. Business owners need professional consultants to assist them with their exit plan and negotiations. The author shares his views on the negotiation process and stresses that business owners must prepare and expect changes to successfully conclude a sale. 2021 was a record year for business sale/exit transactions in the lower-middle market (businesses with valuations between $10 million…
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In 2013, 30 percent of brokered deals and 31 percent of investment bank deals fell through after a Letter of Intent was signed. According to Pepperdine University’s Graziadio School of Business and Management, valuation gaps in pricing were the number one reason that M&A ventures failed. This was followed closely by non-fiscal demands from either party that were deemed “unreasonable”. Interestingly, economic uncertainty and a lack of capital were far less influential than they had been in years past. If there is plenty of cash available, then why are so many deals failing to close? Ilan Mochari shares the answers…
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Buyers and Sellers Have Different Relative Negotiation Advantages, and the Letter of Intent in an Engagement Helps Define Terms. Here’s How. While perhaps not the longest or most expensive document among those found in the in the M&A process, the letter of intent (LOI) may well be the most important, particularly to the seller. The LOI sets the tone for the transaction and serves as the road map for the due diligence and the definitive agreements. Ron Stacey explains.