Loan Tyrants And Finance Bullies – What Every Small Business Should Understand About Financing in Today’s Economy

Posted by on September 2, 2011 in Business Start Up Advice [ 0 Comments ]

Unfortunately, bullying does not stop at high school. A bank does not care if you have braces, acne, and love science or if you’re homecoming royalty, the star of your sports team, and dating the coolest kid in school. When it comes down to it, a bank has control over whether or not a person will get what they want—and I’m not talking about a social standing in your high school.

When it comes to buying and selling a small business, financing as well as the loan process has to be strong. However, according to the Internet’s largest marketplace for buying and selling small businesses,, this is far from the case. To make matters worse, the problem does not look like improvement is in its future. After conducting a survey of the nation’s business brokers on the business-for-sale market’s position, found several astonishing numbers:

• 73% of brokers do not think financing availability has improved in 2011
• 47% say the absence of available financing is the number one factor in stopping transactions from closing
• 78% say banks are to blame for the poor attempt to finance these projects
• 69% say the government is making no effort to help banks who do wish to lend to small businesses, and in fact are making the loan process more difficult
• 64% say that the small business loan process is continually becoming more and more difficult

While financing has been a continuous problem in the area of buying and selling small businesses, the high numbers were a bit of a shock to many. Probably the scariest part about the survey is the results that came next. When asked what the future holds for the financial side of small business transactions, the numbers continued to remain high on the negatives:

• 49% said funding will remain the same through 2011, 42% said it will worsen
• 88% still feel that this market will return to normal, but 50% of those think it will take at least two years
• 85% feel that the US economy will be affected negatively unless something is done about the financing and loan process in this market

Most brokers agree that the problem stems from the current economic situation. Currently, it seems that just about everyone is trying to stay afloat, but what do you do when your paddle boat and life vest are taken away? Steve Wain, CBI, M&AMI, CBB of Calder associates and Carl Cusano, President of Capital Business Advisors, Inc. both provided insights into what brokers are doing in order to succeed in this market.

Real Stories from Real Brokers – The Real Effects of the Problem

“I had a good buyer trying to buy a strong Main Street business. The deal couldn’t close because ALL of the lenders in the USA (we checked over a dozen local and specialized lending institutions) turned their back on the industry. Two years earlier, the deal would have been financed and closed within 6 weeks. The seller had no choice but to give up and remove the business from sale. This business would have helped reduce the nation’s unemployment rolls, but lack of financing inevitably just added to the continued economic woes.” –Steve Wain

It is no question that just about every industry is struggling in this economy. However, this story proves that the small business buyer’s and seller’s market can have effects that far exceed whether or not someone will be able to complete a transaction. In many cases, people assume that this is just another market struggling, but this market is normally responsible for creating a significant amount of jobs. Consider what Cusano says about the American Dream:

“The biggest challenge I see is that those looking to sell have for the most part seen their sales and profitability decline over the past three years, substantially decreasing the marketability and attractiveness of their businesses. Also, the American Dream of Entrepreneurship has lost some of its luster. With 9.1% unemployment, you would think that buyer activity would be way up, as these people might look at business acquisition as a way to buy a job, and/or control their own destiny. Although we see some of this, it is not happening in any significant numbers. As for me though, I am optimistic that entrepreneurship will regain its appeal. I don’t think it’s a matter of if, but a matter of when. The sooner the better.” –Carl Cusano

Most markets are currently in the same (sinking) boat when it comes to the effects of the recent economy. Staying positive and smart when it comes to business purchases is always a good idea, but hopefully beating that bully will come sooner than you think. After all, in the end everyone knows the bully never wins.

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