1. We Will Recover
It’s important to remember that our current situation is temporary. While it will take months to recover economically, and even longer than that for some people, we will recover. For the entrepreneurs who are thinking positive through these dark times, they know there is light at the end of the tunnel, and it’s getting closer with each day that passes. The federal government has released guidelines on opening the economy back up and the governors of each state will begin enacting plans for getting the economy back on track as soon as it is safe to do so.
2. No Payments For 6 Months On New SBA Loans
According to JDSUPRA.com, Section 1112 of the CARES Act requires the SBA to pay the principal, interest and any associated fees that are owed on certain existing SBA loans for a six-month period beginning with the next payment due on these loans. The existing SBA loans that qualify are:
- 7(a) (including the Community Advantage Pilot Program for underserved communities)
- 504 Certified Development Company Loan Program
- Microloan Program
The SBA will also make six months’ worth of loan payments for new qualifying loans made within the first six months of enactment (between March 27, 2020 and September 27, 2020).
The payments to be made by the SBA are not deferments. These payments will be forgiven, and borrowers will not be expected to make these payments at a later date. The SBA has 30 days from the next payment due dates to make these payments. The CARES Act does not require borrowers to notify their lenders or “opt in.” However, eligible borrowers, or borrowers who believe they are eligible, should still check with their lenders to confirm their eligibility before foregoing their next payments.
6 months of no principal or interest payments on a new SBA loan is a great reason to pull the trigger on buying a new business now, but the chosen business will need to be financially healthy. Banks are not lending money to acquire a business that is temporarily closed or that has declined financially over the past few months. So, if you are going to take advantage of this awesome loan perk, you will have to target an “Essential Business” that is thriving.
3. Could Get Reduced Or Deferred Rent
For buyers of existing businesses, part of the sales process is to negotiate a new lease (or in some cases assume the existing lease) with the landlord. If a buyer is not able to get a lease that is satisfactory to them, then they are able to cancel the contract and receive their earnest money deposit back. Since most landlords don’t want vacant spaces in their centers, they would rather work with you to give you reduced rent for a certain period of time or to even defer rent entirely for a specific period of the lease. With the current state of the world, they will hopefully be understanding and be willing to negotiate with buyers. It’s definitely worth a try.
4. Good Deals Are Possible
Some businesses will be coming on the market in the next few months that we would categorize as a “distressed sale.” That means that they have suffered greatly in our current situation and NEED to sell. These won’t be the majority of available businesses, but if you can find one of these listings, you might be able to score a great business for a good price, and then bring it back to life once we are able to get back out and restore our economy. Savvy investors will be looking to spend their available money now, while prices are low, in anticipation of our economy getting back on track in the coming months. Keep in mind that all good business deals are fair to both buyer and seller. So be very careful about how you approach this situation, as low-ball offers on an already discounted distressed sale is not good form. Having a win-win on both sides will make the sale much smoother and will increase the chances of it going the distance and reaching the closing table.
5. A Buyer’s Market Is Here
For years, while the economy has been extremely strong, we have been experiencing a “balanced market” where both buyers and sellers of businesses had equal power in the negotiating arena because there was a relatively even number of buyers and sellers in the marketplace. With the onset of this pandemic, the closing of many small businesses, and the unemployment rate higher than it has been since the great recession, the buyers out there who are still ready and able to purchase a business will, in many cases, find themselves in an advantageous position. The exception here will most likely be the sale of “Essential Businesses” as those will be highly desired by buyers and we could see lots of competition to buy them. However, in general, there will be more businesses on the market than there are buyers for them, and that will create a “buyers market.” So, now is a great time to consider purchasing a business, because as a buyer, you will be in the driver’s seat.
If you are looking for the perfect business, a business broker will be able to help you. The best perk for buyers…you pay your business broker zero for their services. So why not have a professional broker help you through the process? If you have questions about the sales process or about buying a business, we are happy to help. Get in touch with us today!