Why 2021 is the Best Year for Buying or Selling a Business
Covid-19 Relief bills: The gifts that keep on giving.
Owning and operating a business can be one of the most rewarding feelings, and is often associated with the fabled “American Dream”. Entrepreneurship is an integral facet of the American economy, but any small business owner will tell you, it’s by no means an easy task. Owning a business, to the uninitiated, may seem like a blissful career option that leaves out the troubles of working under a boss or manager, but it actually just places their burdens on the entrepreneur themself.
In today’s times, being a small business owner is particularly challenging. The market is volatile, there's a new president, and of course, a global pandemic has kept most businesses big and small operating at low capacity if operational at all. Needless to say, business owners have been suffering some heavy blows, and many have at least considered the option to throw in the towel.
As often as we can, and if it is within our power to do so, we typically try to help small business owners from making it to that point. But it would be unfair to at least not explore the option of selling your business. Interestingly enough, now more than ever is actually a pretty good time to do just that.
As it turns out, the $900 billion covid-19 stimulus package executed by the United States government makes buying or selling a business a very attractive option for some during these unsure times. Along with the stimulus payments, the provision also includes a few key changes to SBA funding programs that cater to both business buyers and sellers alike. More specifically, The changes provide buyers with more savings on their acquisition and sellers with more leverage to make a sale.
The change that makes the most impact would be the SBA guarantee fee being waived until September 2021, giving buyers a grace period in which they can save some cash. After the grace period is up, on loans between $500,000 and $700,000, there’s a 3% guarantee fee of 2.25% of the loan amount paid to the SBA. For loans of $700,001 to $5,000,000 the fee is 3.5% of the guaranteed portion up to $1,000,000 plus 3.75% of the guaranteed portion over $1,000,000. Even loans on the smaller side may subject borrowers to savings of at least $10,000.
Even more attractive to buyers, the SBA will continue where the last stimulus package left off and pay the first 6 months of the buyer’s payments in full! The catch, however, is that unlike the last stimulus bill, this round will put a cap on those payments, designating a maximum contribution of $9,000 per month, and the offer applies to the period of time between February 2021 and September 2021. Still, as these contributions are not meant to be paid back, and will not be tacked on to the tail end of the loan, it is quite an enticing offer for buyers.
With such attractive terms, it would be hard for the sellers not to benefit from all of this. Lower interest rates mean cheaper loans for buyers, which in turn allows them to purchase more. This means that sellers are not only more likely to find a buyer, but may also be able to ask for more for their business. For those not looking to make the extra change, selling a correctly priced business in that climate is nearly a guaranteed sale.
All in all, from now to September, there may be no better time to buy or sell a business. The cost of money from SBA funding has NEVER been this low before, so try not to miss out. While there may be more covid support in the near future, it’s like the old adage says: a bird in the hand is worth two in the bush.