Exit Strategies Insights

Industry insights, knowledge base and announcements for business owners and professional advisors

Acquire a Business Insights

California Loan Guarantee Program: A viable financing option for small business acquisitions

Banks often use the Small Business Administration 7a program to guarantee acquisition loans for small businesses.  Because small business ventures face unique risks, most do not qualify for conventional bank financing.  In most states, the SBA program is the only option; however, here in California a less well known alternative called the California Loan Guarantee Program is also available. California’s program is not new. Our state has been offering loan guarantees since 1968.  It is administered …

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How to Apply for an SBA Loan

Thousands of small businesses receive funding for real estate, equipment, working capital and business acquisitions through loans guaranteed by the Small Business Administration (SBA). SBA loan terms are very reasonable. Down payments range from 10%-35% depending on various factors. Interest rates are generally 2-3% above the prime lending rate. This low cost of capital has helped many to achieve the dream of business ownership. SBA offers two loan types: guaranteed and direct. Guaranteed loans involve …

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Show Me the Money: Financing Strategies for Small Business Acquisitions

Of the many considerations when purchasing a small business, one of the most important is how to finance it.  Even if you have all of the cash you need to buy a business, as a smart investor you will consider whether you are better off borrowing some of the money or bringing in an equity partner to spread the risk. Each source of business acquisition financing has its benefits and drawbacks. Before you identify a business that meets …

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Why Start-Up when you can Acquire a Business?

The successful start-up entrepreneur has been glamorized in the media through reality shows like Shark Tank and wide spread accounts of people that have become fabulously wealthy growing a business that started with a kernel of an idea. However it’s no secret that the rate of start-up failure is notoriously high, according to the bureau of labor statistics about 50% fail within the first five years. With odds like that it is no surprise that …

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The Best Financial Decision I Ever Made

In 2007 I found myself at a crossroads. After almost twenty years on a steady career path, I felt it was time for a change. The problem was that I didn’t know what I wanted to do next. I considered going into consulting, did the mandatory networking with old contacts, and even gave serious thought about doing a start-up. But I didn’t have that one great “do what you love” or “change the world” idea. …

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Recent Trends in the M&A Market

Pepperdine University, of Malibu, California, in conjunction with the International Business Brokers Association and M&A Source, publishes a quarterly Market Pulse Survey of business brokers that provides useful information concerning the market for Main Street ($0-$2M sales price) and lower middle market ($2-$50M sales price) businesses. Highlights from their most recent report for Q1 2016, include: 50% of all business sell Retirement is still the prime motivating factor for sellers followed by burnout. The strongest growth …

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Benefits of Buying an Established Small Business

So you want to be your own boss ― no superiors, no shareholders, and no board of directors. Consider the options ― you can work as an independent contractor, start your own company, or buy an existing business. Each option has benefits. If you analyze the risks-versus-rewards carefully, you’ll learn what many seasoned entrepreneurs have discovered … the scale tips in favor of purchasing an existing business. Admittedly, as an independent contractor (including sole practitioner professional …

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The Federal Reserve and Interest Rates

The Federal Reserve controls the three tools of monetary policy — open market operations, the discount rate, and reserve requirements. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, …

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What is a Confidential Information Memorandum and why should I care?

There is a critical document used in the business sale process known as the Confidential Information Memorandum or “CIM.” Other names for this document are pitch book, deal book, offering memorandum and confidential business review. A CIM tells a company’s story and lays out important facts and figures for prospective buyers. This article answers common questions about deal books and explains how they benefit sellers of businesses. Who receives the CIM and when? Buyers receive …

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The Significance of Disclosure in a Business Transaction

Full disclosure by buyer and seller is a vital component in any successful business sale/purchase transaction.  In a small business transaction, buyer and seller disclosure statements are customarily exchanged and reviewed before or during the due diligence process. Hopefully there are no significant surprises at that point and the transaction proceeds smoothly. When the buyer is an individual, the buyer’s disclosure statement generally focuses on the buyer’s personal, professional, and financial background and reorganization plans. …

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