This current recession in 2008 and 2009 is marked by how low the economy has gone, the increase in unemployment, but most frustrating of all, how long it has taken before the “green shoots” appear. If your business is struggling and you think your only option is to close the door and hand the keys back to the landlord, here are some things to consider.

First, it’s rarely as simple as closing the door and handing the key back to the landlord. If your business has a lease you obviously need to discuss the situation with the landlord. If you have a good relationship and feel you can handle it on your own to save hiring help, take care as you handle the issue. Bear in mind the landlord is no different to you. They lease the real estate to make money. If you close the doors, they need to find a replacement for you which may take time to achieve. This can be a talking point with the landlord as you may be able to bring a tenant to replace you. If this is the case, make sure this is correct as the landlord may become frustrated if the person changes their mind. Similarly, the landlord is not required to accept the person you bring so be aware the landlord has options.
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The following article is re-printed from an email sent by Mike McGrane, an SBA lender with Wells Fargo based in Roseville, CA.

The Senate and the House have both passed various versions of the following improvements to the Small Business Admin 7a and 504 loan programs. This is a very good thing for Small Business, Entrepreneurs, Banks and Business Brokers and Developers. There is something for everyone in this Senate Bill outlines below. It still needs to be signed into law and the SBA needs to make their official guidelines public, but this should be what is coming.
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Gilmore Bank in Los Angeles, CA just released the following information about great news on upcoming changes to the SBA:

On October 21, 2009, President Obama announced steps that the administration is taking to expand access to capital for small businesses. Senate Bill 1832 was introduced by Senator Mary Landrieu to implement the administration’s initiatives.

HIGHLIGHTS OF THE PROPOSED LEGISLATION INCLUDE:
• Increasing maximum 7(a) loan size to $5 million
• Increasing maximum 504 sizes to $5 million (non-mfg) and $5.5 million (mfg)
• Increasing maximum guarantee dollars to one applicant/affiliates to $4.5 million
• Extending 90% maximum 7(a) guarantee percentage through 10/1/2010
• Extending ARC Loan relief to existing SBA loans
• Increasing the maximum microloan loan size from $35,000 to $50,000
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The number one reason most transactions don’t close after a buyer and seller have “negotiated” a deal is that the landlord cannot come to terms with the seller and/or buyer.

The number two reason is that finance is not available.

For obvious reasons, a seller prefers cash. Tom West of Business Brokerage Press is a writer and analyst on small business transactions. According to West, his research has shown that sellers receive a significantly higher purchase price if they decide to accept terms or carry a seller’s note and that, on average, a seller who sells for all cash receives 69.9 percent of the asking price whereas if the seller is willing to carry some of the finance, the selling price will increase by 15.8%. For example, if a business is listed for $150,000, and the seller who is willing to carry some finance, they will receive approximately $24,000 more than the seller who is asking for all cash.

Applying the above but instead of looking at selling price but gross sales, West has found that a seller who asks for cash receives, on average, a purchase price of 36 percent of annual sales; compared to the seller accepting terms, who receives an average of 42 percent of annual sales.
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The following is an article by Chrystal Jarvis of the Birmingham Business Journal about good news for Small Businesses looking for positive news about finance for their business.

The U.S. Small Business Administration is looking to offer more government-backed loans to commercial businesses.

The government agency has proposed increasing the size standards for 71 different types of businesses, two-thirds of them in retail trade sectors. The rest are in accommodations and food services and other services.

If adopted, more small businesses will become eligible for government loans and will have access to the SBA’s financial assistance, contracting and other programs.
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The following article was published in a newsletter to the members of the Calfornia Association of Business Brokers. It was written by Bob Porter, Vice President, Business Development Officer (BDO) Plumas Bank and provides an useful insight into how he sees the current SBA loan market; in the Sacramento region and particularly in Northern California.

Between 2000 and mid-2007, there were more SBA lenders and BDOs than you could shake a stick at. In fact, so many that despite the strong economy, business was tough because each lender’s piece of the pie had shrunk to a relatively unprofitable level. We were tripping over each other, pricing loans at historically low margins, leveraging deals greater than in years past, accepting little or no collateral, poorer than normal credit scores, less than customary industry/business experience, etc.

Similar to the housing market, the SBA industry was lending at an all-time extreme.
Today, however, the pendulum has swung the other direction. Many (I want to say most) SBA lenders have left the business. I estimate that only 20% of us are still active in the market from its heyday. Sure, many lenders might still tout that they offer SBA 7a business acquisition financing but take at look at SBA’s year-to-date production list and they are nowhere to be found.
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With negative economic news grabbing the headlines in the United States, business owners may think it’s not a good time to sell their company. But fortunately for owners looking to sell, that’s not necessarily true. 

Business sales are still taking place with sellers capturing attractive prices and favorable terms, when the deal is structured properly. 

Look at the buyer’s credibility
Of course, you want to find the best buyer possible. Whether it’s an individual, another company or a Private Equity Group, look for a potential buyer with business acumen, significant assets to pledge as collateral or a committed fund, as well as demonstrated success.
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The current economic climate continues to hinder some business sales, but even with a challenging environment, businesses are changing hands. Regardless of the economy many aging boomers are looking to retire, while younger boomers are interested in buying and becoming their own bosses. 

This is the time when business savvy people don’t take cover but actually dig in. While some business owners are hiding from the possibly negative and money draining effects of a struggling economy, there are those who continue to look to buy and are finding that deals can still be done. 

Many business owners are concerned with the future and already have plans to sell in the next few years. They may be even more motivated to start the sale process now since businesses that are in the market are not selling as fast as in recent years. Buyers are discovering that business opportunities do exist, and that regardless of the state of the economy, deals are being done, they may simply require some creativity.
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As baby boomers begin to hit retirement age, many who are business owners are ready to sell. It’s created a market that has many businesses for sale. 

At the same time, concerns about the economy had made it tough to get financing for many potential deals. Seller financing is one option that could be the solution to get many deals done.

Seller financing involves a seller helping to finance the sale of the business by taking back a second note on the business. It differs from a traditional Small Business Administration (SBA) loan because the seller essentially extends credit to the buyer against the purchase price of the business. However, seller financing is misunderstood by many, even though it may be the best way to sell a business during a stagnant economy.
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A lot of new business owners like to move quickly. They work through their decision to move into business ownership, do a little research, decide how much money they have, how much they can borrow and then start doing “it”…whatever “it” means for them and their business.

There’s no question that research and understanding your finances are important. Going into business requires money and what goes on around it. However, if you want to borrow money to help fund your new business you are going to need at least 4 things. If you can’t be bothered getting these together you will not be taken seriously by sellers, landlords, business brokers, lenders or other related parties. Or worse still, you’ll be taken seriously, asked for these documents and when they found not to be in order, your dream will be shattered.
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