We speak with advisors every week (usually every day) who are actively looking to acquire practices but are not familiar with where to start regarding financing the acquisitions. Here are 5 tips to consider:
- Do you know how much you are qualified to borrow for your acquisition? Narrow your acquisition targets to the practices you can afford.
- Does your broker dealer or custodian offer alternatives to SBA loans through direct loans or “Lender Enhancement Agreements” with conventional lenders? Thousands of advisors have this option do you?
- Do you understand typical acquisition payment structures and terms when the acquisition is being financed by a bank or the SBA? It’s beyond frustrating to a buyer when the deal falls apart at the last moment because the seller wasn’t fully aware or informed of conditions set by the lender or SBA.
- Do you have your financial information in order? Last 3 years tax returns will be needed. Do you have your 2016 tax returns completed? At this point in the year, loans will need 2016 completed tax returns before they can be closed.
- Do you have a pre-qualification letter from a lender you can show the seller to separate you from the buyer pack? With the current availability of financing, sellers are becoming less willing to seller finance the majority of the sales price. Buyers who do not have financing lined out are at a competitive disadvantage.
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