Resources for Buying and Selling Online Businesses

An SBA Buyer May Pay More – How To Prep Your Business


Stephen Speer

Stephen Speer is the Founder and CEO of eCommerce Lending and Focal Point Lending. He has over 28 years of experience in the e-commerce lending space and is an expert in facilitating financial needs for entrepreneurs. His previous role as a lender in various financial institutions and his role as the Vice President for BankUnited Small Business Finance helped him acquire valuable acquisition tools.

He graduated from the University of San Diego in Business Administration. Stephen resides in Florida with his wife and children and enjoys watching Formula 1 racing.

Here’s a glimpse of what you’ll learn:

  • [03:27] Stephen Speer talks about preparing your business for the greatest exit
  • [07:43] The definition of an SBA loan and the part an aggregator plays
  • [10:46] Why you should have clean finances
  • [15:34] Stephen explains the difficulties and return of add-back spending
  • [18:35] Building a portfolio through SBA financing
  • [24:36] Stephen shares how a domiciled business can apply for an SBA loan
  • [33:11] What can delay a deal and how to overcome it

In this episode…

How can you present your business to potential buyers to achieve the greatest exit? As an entrepreneur, is there a way to navigate the loan process?

Let’s cut to the chase: the more buyers you have competing, the higher your exit will be. However, many entrepreneurs enter the exit of their business unaware of the potential for greater returns. Stephen Speer recommends you prepare your business by aligning your finances through verifying and using an e-commerce bookkeeper and prequalifying for an SBA loan. Stephen knows that as an entrepreneur, having the patience to grow and scale your brand can build up a greater financial exit — a few months can lead to a more significant increase.

In this episode of the Quiet Light Podcast, Joe Valley and Chris Wozniak sit down with Stephen Speer, Founder and CEO of eCommerce Lending, to discuss the best practices for preparing for an SBA loan process. Stephen discusses how to avoid common mistakes when preparing for your eventual exit, the importance of regulating financial documents, and how to streamline your exit. Stay tuned!

Resources Mentioned in this episode

Sponsor for this episode…

This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. By providing trustworthy advice, effective strategies, and honest valuations, your Quiet Light advisor isn’t your every-day broker—they’re your partner and friend through every phase of the exit planning process.

If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.

Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on their website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!

What are you waiting for? Quiet Light is offering the best experience, strategies, and advice to make your exit successful. To learn more, go to, email [email protected], or call 800.746.5034 today.

Episode Transcript

Intro  0:07

Hi folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.

Joe Valley  0:29

Folks, I’ve got a co-host today with the Quiet Light Podcast Mr. Wozniak. Welcome to the Quiet Light Podcast co-hosting duties.

Chris Wozniak  0:37

Oh thank you so much for having me.

Joe Valley  0:39

We’ve kicked you Mr. Doust to the curb. He doesn’t listen to the podcast so I can say that mark is gone he’s out it’s just Mr. Wozniak and myself now kidding. All all kidding aside, he’s here forever. He’s a life he did find the company so he should be a lifer. We’ve got a very special guest for the third time today, folks it is Stephen Speer from eCommerce Lending. Chris in the past, Stephen and I have talked about you know, SBA loans for buyers and what they have to do to get one and and the benefits of it and the financing aspect and all these different things. Today we’re gonna flip the script a little bit and talk about what to do to prepare your business so that you qualify for an SBA loan and you have more buyers available or able to buy your business what’s the upside to to having more buyers be qualified to buy your business grasp?

Chris Wozniak  1:31

Well, it’s it’s huge. I mean, I tell every seller if there’s any chance we have, let’s try to get you SBA pre qualified because you know, you’re talking about a much smaller pool of buyers that may need all cash to buy your business. If we can find buyers that need maybe 10 or 20% down to buy your business you can imagine that the pool of buyers expands dramatically so if we can get you pre qualified it’s a huge win out of the gate. And there’s there’s just so many nuances to getting your business prepped to get pre qualified so I’m really strongly urge any seller that’s that’s thinking about it that really doesn’t know what the SBA is and doesn’t know what lenders are and how that’s all intertwined to just take 30 minutes and listen.

Joe Valley  2:13

Yeah, I agree 100% if you want to get maximum value for the business, prepping it to be SBA qualified or pre qualified, is going to open up to more buyers and the more buyers that are interested in your business and can buy your business, the closer you’re going to be to your financial goals and definitely get a better deal structure in most cases. So let’s get to it. Let’s jump to the podcast with Mr. Speer. Here we go, folks.

Chris Wozniak  2:42

Stephen, welcome back to the Quiet Light Podcast are you doing?

Stephen Speer  2:45

Doing well, Chris, thanks for having me back.

Chris Wozniak  2:48

Absolutely. Great to have you on.

Joe Valley  2:50

Absolutely. Yeah, Chris. Could have Stephen back for what the third time, Stephen? I think

Stephen Speer  2:56

it is a third time. I think the first was 2017 or 16. Maybe?

Joe Valley  3:02

Yeah, you were one of the early guests on the podcast. That was a long time ago. I had less grey hair back then. I think it was taller too but nobody can tell you

we’ve all changed and that’s why we’ve got Wozniak on the podcast here folks because he’s younger and better looking than Stephen and I and we needed to bring some you know, fresh blood here for you younger entrepreneurs that are just looking at us old guys going What are these guys now. But listen, this is what we’re going to talk about today we’ve had Stephen on in the past, talking about, you know, preparing, I mean, how to buy online business with an SBA loan, something that was critical back in 17 all the time, actually, because the deal structures change. And now with the aggregate aggregators, it seems harder and harder to buy an online business and fight against the aggregators because they’re jumping on stuff really fast and can pay all cash. As Krishna has always said, it’s it’s it’s an extra 45 days maybe to wait 60 days to wait to close. And there’s two upsides to it a the SBA loans, you know, 90% of them close, and I know you have to wait an extra 60 days maybe. But the upside to that is that you also get an extra 60 days worth of revenue and profit, plus probably a better deal structure. And we’ll get into that a little bit because today’s podcast is actually about how to prepare your business for the SBA loan process so that you can have a broader base of buyers. Whether it’s an aggregator for an FBA business, they are going to content sites and Shopify stores now or DC stores, but also for any kind of business, whether you’re SAS or content or e-commerce, to just make sure you’re gonna get maximum value on the best deal structure when you sell your business. Stephen, on this podcast, we’re going to talk about this a little bit more, but why don’t you give us a general overview of how to prepare a business for, you know, thinking or why somebody should prepare the business should think about preparing it for the potential SBA buyer.

Stephen Speer  5:17

Now, as you know that the main thing is the key word is prepare, as opposed to just oh, I’m going to, I want to sell my business. It’s all about preparation, not only from the aspect of selling the business, but also to set the business up for a successful last exit and be able to essentially have the largest net profit at, you know, the largest check possible upon exit, and part of that is to be able to position the business in a way that when you go to exit, it qualifies for financing, you know, ultimately, especially at the higher price points, you know, it’s very rare to have individual or, or even in a collective group, just stroke a check for an acquisition of a business that’s, you know, 1,000,002 million $3 million dollars,

Joe Valley  6:12

because that’s a that’s a higher price point is that 234 million range that we think sorry, you said on that higher price point, and then you actually defined it for me, but you’re thinking, you know, 234 million would be where you think we start to see not all cash deals.

Stephen Speer  6:29

Right? excluding you know, the aggregators that that you mentioned earlier,

Joe Valley  6:36

you know, some of them fight for they say all cash, Chris, right? But then, and their email, Stephen, say, all cash will pay all cash. I’ve even seen one that says, we’ll pay all cash. And if you’re under a law with somebody else, we’ll beat that by $250,000. And we were under LSI, with that aggregator in a deal, and they did not pay all cash, and they were haggling, and doodles just like crazy. None of it was math and logic. It was just doing it for the sake of doing it. And so what they say is not always the truth. So with SBA loans, and SBA deals, you may end up with a much better deal structure, like mostly cash, I guess what you’re getting at Stephen, right.

Stephen Speer  7:18

Exactly. And also, I mean, aggregators definitely play their part. But at the end of the day, you want to open up your business to as many potential buyers as possible. And supplying, you know, basic supply and demand, the more buyers generally push us a price point up. And that’s why it’s important to position your business for exit from a financing perspective. And unfortunately, most sellers don’t do that. They, you know, back to a couple points you made, for example, in your book, you know, they just decide to sell and they’re really not ready to sell. They don’t. They haven’t prepared for exit. And usually that takes time. Right, Joe?

Joe Valley  7:58

I wrote a book. What book are you referring to? Oh, wait, I did.

Stephen Speer  8:01

Yeah, there’s no grey here.

Joe Valley  8:02

Just for clarification, though. Chris. I’m on no Walker Deibel. Right. I haven’t. I haven’t done what Walker’s done.

Chris Wozniak  8:09

No one is.

Joe Valley  8:11

Have you seen him lately, Stephen?

Stephen Speer  8:14

No, he looks like he’s on a sabbatical.

Joe Valley  8:18

No, no, no, no, he’s going, he’s going he’s going out to shows and events. And he looks like he’s auditioning for a role in a Tarzan movie. His hair is is so long and down here. Anyway, sorry. I know why. You don’t listen to this. Somebody might have the clip and be sharing it with you. But you’re fun to make fun of. Yeah, you got a position the business for sale. I’m sorry, Chris. Go ahead.

Chris Wozniak  8:39

I was gonna say just Stephen, kind of taking a step back. One thing I’ve kind of noticed, which is strange with my sellers is and it’s made me kind of reflect on how I’m proposing SBA financing to them. But one question I kind of get or a theme is, and I’ve realized this is a lot of sellers and I’ve kind of talked about SBA financing, I realized they don’t understand exactly what it is, like from a real basic premise. So like, they’ll say things to me, like, you know, what does SBA financing mean, I think I’d much rather get cash at closing. And it’s like they they’re thinking that some type of loan where they’re not going to get cash at closing. And I’ve realised I have to explain this better, like really, because they don’t they have no clue what the SBA financing is. They also think they’re getting money from the SBA. Which is not true, either. What’s, what would you say to sellers? I mean, I know the answer, but when we know sellers to educate them on that,

Stephen Speer  9:33

I think the key is just telling them that it’s essentially a buyer obtaining a loan to acquire their business. And the loans not from the SBA loans from a lender who happens to have the loans partially guaranteed by the SBA, Small Business Administration. So oftentimes, and that’s kind of something that comes up quite a bit in conversation that we have here at eCommerce Lending is that they think The loans coming from the SBA, and it’s not. So it’s essentially a loan coming from a lending institution that happens to be guaranteed or insured against default. But at the end of the day, the seller does get a sizable check at closing, with very, a lot fewer strings attached and maybe an aggregator type deal. So it’s really a win win. And, you know, generally they get more money at closing. So if they’re willing to wait an extra, as Joe mentioned, 45 days to access it. You know, it’s, it’s, most people would do that for an extra couple of $100,000.

Joe Valley  10:39

Yeah, let me say a couple things. First, in regards to aggregators, I’m going to agree with you, Stephen, they’ve been very good for the market, folks, they’ve really exposed the idea of being able to sell an online business, so much better than we have, we’ve been around for 14 years, these guys have been around for four. And now everybody knows you can buy an online business or an FBA business, that’s something we struggled to get across people’s minds for a long time. And second, Chris, as far as the, you know, hey, I’d rather get cash at closing than do an SBA deal. I’ve come across the same thing. And it’s almost like, when you see a piece of, you know, some real estate for sale, or you’re selling your home, and you know, somebody comes to the table, and they’re making an all cash offer? Well, at the end of the day, that person that’s, you know, making an offer with financing, it’s all cash as well, it’s exactly the same, the only difference, there’s two differences, one, probably the all cash offer is lower than the other offer, because they literally are using all of their cash. The that’s the downside. The upside is, you know, with a loan offer, the The only other issue that people have great fears about it, Stephen is that, you know, like with real estate, that person wouldn’t be approved for the loan. But with your process, you get everybody pre approved. And that’s what we do a quiet like, Chris, you would never go under LSI without, you know, on an SBA deal without having the buyer pre approved already from a lender like Stephen,

Chris Wozniak  12:11

correct? Yeah, the buyer and the seller pre qualified for sure. Yeah, I see,

Joe Valley  12:17

let’s let’s get right on track into how to, you know, what, what things you’ve got to do to prepare your business to get the best value on an SBA loan. So give us some idea on what what entrepreneurs, owners of businesses can do today, to make sure that when they do go to sell, that they’ll be able to qualify for an SBA loan,

Stephen Speer  12:36

you know, in to answer your question, I think, you know, what are the biggest challenges in that happening? You know, one, books that aren’t clean books, they’re the financials are a disaster, and unfortunately, you know, we see that quite a bit. And I think primarily because sellers when they establish, let’s say, an FBA business, Amazon business, it’s kind of more of a mom and pop, you know, extra revenue stream kind of approach and then it just evolves over time. And they really get behind the eight ball with their financials, you know, be it their p&l and balance sheets and and tax returns. And that’s the biggest challenge from a lending perspective is that oftentimes the the financial information provided by the seller to us is a disaster. So what we try to do is

Joe Valley  13:28

what’s your definition of disaster though we talking about people that just don’t do a good job in QuickBooks, or they commingle three different businesses and one you know, LLC and tax return? I mean, that’s that’s always hard, commingling your financials, how do you deal with separating those out if somebody is done that they’ve got a business that’s four years old, and another that six and they’re trying to sell the older one, but it’s all under one LLC, one tax return? Is that even sellable with an SBA loan?

Stephen Speer  13:57

It is, and that’s, I would say, you know, in terms of ranking, that’s one of the biggest problems that’s the biggest problem is commingling of businesses. S

Joe Valley  14:08

what do they have to do if it’s too late to fix that? If they’re ready to sell now? And the best buyer is an SBA buyer, what do they have to do? And when do they have to do it? Well, if

Stephen Speer  14:19

they have to sell immediately, that’s not going to happen from a financing perspective. But if they have a little bit of time, they hire a CPA and they start having their financials delineated into what’s called consolidated financials, meaning the revenues and expenses of each business. Each of the businesses are delineated onto kind of a formal format by a CPA, not a bookkeeper by CPA. And then from that standpoint, were able to move forward. We have quite a few deals that we’ve had it had an inner, you know, intercede and get in there and help that CPA along the process. But at the end of the day, those deals ended up getting approved and closed. Yeah.

Chris Wozniak  15:03

Sorry, Joe. Yeah, go ahead, Chris. Okay, I was gonna say I’ll speak to that I’ve given Stephen and I’ve done a handful of deals this year. And I’ve given you some doozies on about half of those, Stephen that had pretty complicated financials even the last year we just closed and you were able to help kind of guide us with kind of a template for the letter delineation and then kind of an accompany spreadsheet that that gave you the visual of what the letter delineation was trying to explain. So it is, you know, I’m speaking from firsthand experience, it is possible, and Stephens gotten them done where there were the financials were not exactly clean.

Joe Valley  15:45

And that, that that letter from the CPA, when they delineate everything happens after being under a letter of intent, and it just adds to the amount of time and due diligence and ultimately to closing statements.

Stephen Speer  15:57

Well, what we do is when we prequalify a business, I’ve, you know, we’ve pre qualified several of Chris’s businesses, we, you know, we’re told, hey, just so you know, there is commingling and then Chris will provide us with p&l cells that have that delineation. And that’s a good starting point to be able to prequalify the business with the understanding that once we do go on, or Li, a formal consolidated financial statement needs to be provided by a CPA. So so any broker is knows that any seller knows that once he or she is under Li that they need to, you know, hire a CPA and have those financials formally delineated? Yeah, we did it with

Joe Valley  16:47

Ramones business years ago, when we saw that as well. And everybody’s heard the story about Ramon, in terms of his exit. Chris, you’ve never had a p&l with, you know, a lot of add backs in it, right? People don’t write things off in q4, when they’re buying Christmas presents to the family. Right? You never seen those? Have you

Chris Wozniak  17:08

ever seen a cache attacks turn on cash basis? never seen that before? Either? So yeah,

Joe Valley  17:13

yeah. So they’re all kind of messy and low. I mean, it’s it is what it is. But, you know, one of the things that I learned early on Stephen and working with you is that your team will actually and and actually in underwriting, they’ll do a little bit of an ad pack schedule, to it’s not the bottom line number on the tax return, necessarily. Sometimes there are some pretty crystal clear add backs that you can adjust for as well. Right, that’s the second biggest problem is when somebody is writing off everything they could possibly write off in the business, and it dramatically lowers their tax burden, but also makes the business less sellable. How do you address some of those issues?

Stephen Speer  17:57

I mean, you’re right, so it’s not just the bottom line number on a tax return, we do have quite a few add backs, especially in the online space. And oftentimes we have a discussion with the broker of what those add backs may be, to be able to, to utilise those. And you’re right sellers get really aggressive with their tax returns, they run every single personal expense through them. So it’s our job with the sellers help and sometimes even a CPA to really start figuring out with with what those add backs are and be able to to add the Mac sometimes actually, we’ve had it where we consulted a seller with his or her CPA and and actually amend their return is pretty it’s not entirely uncommon for us to do that to say, Listen, I know you’re aggressive. I know you may have to write a you know, write a check to the IRS, but this might really work out well. I mean, back to your point, you know that you’ve always said, you know, choose your pain, you know, and ultimately verb willing to write a check to the IRS, but get tenfold out the back when you go to sell a business. You know, most people would do that. Yeah, well,

Joe Valley  19:12

yeah, I’d love to I’d love to agree 100% that most people do that. But oftentimes they’re just they’re afraid of the unknown, right? You know? uninformed mind always says no, I used to say ignorant mind but a few people got insulted by that. So I now say uninformed. But that’s the point of having conversations like this, Stephen, other than, you know, cash, there’s SBA financing, what other types of alternatives are there for people that are selling online business and not and it does matter people if you’re the seller, an online business because you need to prepare your business to be sold to a great buyer at a great price and that great buyer may be you know, in need of financing and so if you’ve done a good job with, you know, a proper p&l accrual accounting, as Chris said, And, you know, proper add back schedule with someone like Chris myself helping you, it’s going to help you get to the bottom line goal that you’re trying to shoot for. But are there alternatives to SBA lending Stephen, or is it prime? You know, in your view and your experience is that primarily, you know, the alternative to cash?

Stephen Speer  20:22

And that question comes up a lot, Joe and, and there really isn’t an alternative test B financing. The main reason being there’s, there’s no collateral on these deals, it’s simply cash flow lending. And traditional lending requires collateral. So that’s the biggest challenge. And so there’s no there there, you’re selling a business based on its cash flow, and you’re buying a business based on its cash flow. And generally, there’s no collateral involved. So really, it’s SBA financing, which isn’t necessarily a bad thing. As you know, SBA financing allows for pretty significant leveraging. So, you know, oftentimes we have clients that can pay cash, but choose not to, because they’re looking to build a portfolio of businesses. So they, if they pay cash for one deal, they’re not going to be able to have enough liquidity to buy other other businesses. So they do utilise SBA financing to be able to build that portfolio. So there are a lot of attributes just be financing. And another attribute is it’s very cheap money. So if you’re willing to wait a little bit longer for closing, the seller is willing to wait a little bit longer than is definitely the way to go.

Chris Wozniak  21:41

Stephen from a borrower’s perspective, you mentioned you may have a buyer that has cash where they can actually do the deal with cash, but they choose to leverage their money and use SBA. From a net worth perspective, a Meyers financial situation, what are what’s what are SBA requirements and limitations from that regard? So I know, we recently did a deal where the buyer was so strong, financially, his balance sheet was so strong, and it actually, you know, you’d think opposite, but it actually made the deal a little more difficult at the beginning. So can you talk about that

Stephen Speer  22:14

a little bit? That’s a really good point, Chris, every once in a while we have a buyer who is extremely liquid, for example, he’s trying to buy a $2 million business, he has $7 million in the bank, that that’s a problem. Because what the SBA does, even though they don’t, they’re not the ones lending the money, they do have their own guidelines. And if they feel you could easily pay cash for a business without major impact to your to one’s lifestyle, or, or, or otherwise, they won’t, they won’t allow a lender to to lend to that person. So every once in a while we do have that situation, we’ve had it twice this year. There are ways to navigate through that which, you know, I discussed with buyers, but for the most part, it could cause a problem. It’s kind

Joe Valley  23:05

of crazy to think about you get 7 million in the bank, but you don’t qualify for a $2 million SBA loan. It’s, you know, one of the best pieces of advice ever got was on the golf course. And I was slicing and hooking. And I’m not a very good golfer, just to be clear. But it was from Walter and it’s my wife’s uncle. He’s been my mentor for years very successful entrepreneur. But he said, set up a line of credit. You know, if you’re in business and you’re an entrepreneur, you’re going to need a line of credit someday. And you want it already set up when you’re ready to take action. And in this case, if you’re buying a business, that person that’s got 7 million in the bank, you should have all sorts of lines of credit set up, whether it’s a HELOC, or with the bank or with his investment advisors, whatever it might be. So if you haven’t done it already, folks, I definitely advise that you do that. Stephen for sellers when they want to say Okay, um, you know, we talked to them about preparing their businesses and getting trained for that exit and that’s why the book is out there. That’s why Chris is here to help people with valuations and help them along this journey. SBA wise, what what do they do? What do they do to begin that process to make sure that businesses qualify for an SBA loan from your point of view,

Stephen Speer  24:16

so they’ll come to us typically anywhere from six months to two years prior to exit and then we request their financials and we do a pretty significant you know, forensic audit of them and go back with recommendations. And it may be, you know, it may be as severe as you know, you should consider amending your return to pay, you know, moving forward from this point forward, be less aggressive on your taxes, run less personal expenses through it could be a myriad of different things. In some in some cases. We have people outside the United States wanting to get as much you know, as much for their business as possible. In those cases, we recommend them actually domiciled in their business here in the United States. We had one seller, he was Australian. And that’s exactly what we recommended. He ended up doing it, gosh, for three and a half years ago, any accident last year, with a very nice, you know, very nice reward at the end of it all. But part of that planning was for him to take his Australian company and diamond style it here in the United States for at least two years. And then this business ended up qualifying for SBA financing.

Joe Valley  25:37

That’s a mature entrepreneur right there somebody that’s gonna think that far in advance, take some time and experience to do that, Chris, how often do you run across folks like that? Well, we actually Stephen

Chris Wozniak  25:46

and I just had a call. What was it Stephen, like a month ago. He’s our seller was in the UK. And the same thing isn’t really sellable business, but it’s just in the UK, and we couldn’t get it sold. So we actually I kind of rolled the idea out about SBA, but it was kind of a long shot. And I didn’t know how he would react. But he ended up kind of reaching back out to me and said, Hey, Chris, I mean, do you think it’s possible if I had, you know, X amount of years of tax returns in the US? Do you think we could eventually get SBA financing and get this thing sold? I said, Yeah, I think so. But let’s, let’s get Stephen on the phone first, because I, I really wasn’t sure I hadn’t dealt with a overseas business that had proposed that question to me before. So we, we got on a phone call with Stephen and Stephen, kind of walk them through it. And yeah, that’s the case. I mean, two years domiciled us returns, and we can get qualified. So

Joe Valley  26:37

what are the hoops to jump through to have a US entity? If you’re a UK, Australian New Zealand resident, I see that question on forums, and I see a dozen different answers. What’s your view on that? Stephen, how do you how do you recommend people do

Stephen Speer  26:51

it? Well, first off, I never give out tax advice. Obviously, I’m not a CPA, nor am I a CPA in the UK, but I set kind of the guy the kind of the guidelines from a lender’s perspective, and then they go back to their accountant or CPA, and they’re able to get those wheels in motion. It’s not as hard as you think. And it’s not where they’re getting double taxed. There is a way to be able to formulate it, where you’re not subjecting your business to more taxation. So I don’t get in the weeds on that. But I know that, you know, we’ve been successful in being able to consult our seller clients to, to put that in place and, and have a successful exit at the end of the day.

Joe Valley  27:36

So you deflect is what you do. I don’t I’m not an attorney. I can’t give you that advice. I’m not your I know, that’s what we did. You can’t give advice where you’re not, you know, have to

Stephen Speer  27:46

qualify. I have to I mean,

Chris Wozniak  27:49

so yeah.

Stephen Speer  27:50

I agree. And, and, you know, and yeah, I mean, how many legal questions do the two of you get on a daily basis? Probably all the time, right? Yeah. Yeah.

Chris Wozniak  28:00

Questions, too. So, yeah,

Stephen Speer  28:03

accounting questions, legal questions. And, you know, you could give some sort of opinion, but at the end of the day, you know, I always I always say, I’m not an attorney, or I’m not a CPA. Yeah, but here’s my opinion. Because obviously, we don’t want to get, you know, I don’t play one on TV either. And, you know, obviously, we’re not we’re not in a position to give out legal or accounting advice, of

Joe Valley  28:28

course, of course. So, if Chris and I are in the valuation process with a company, and they want to end up getting the best possible deal, at the end of the day, preparing their financials properly, would be one of the recommendations. If they don’t have an e-commerce bookkeeper, we’re going to recommend get an e-commerce bookkeeper and flip your cash accounting to accrual. It’s cheaper than a lease on a Tesla folks, it’s so much better than doing it on your own. And actually, I don’t know what the lease is on a test. I guess it depends on the model. It’s worth doing. Let me just put it that way. And it’s a heck of a lot cheaper than having an in house bookkeeper, and then that person is going to be able to just hand things off to your CPA, which is going to be great for tax returns. But if you’re commingling, then you’re gonna have to have your CPA, do some work as well. So CPA is going to have to, you know, separate them out as C dimension, you’re gonna need to hire a bookkeeper, preferably e-commerce bookkeeper, and definitely, you know, accrual accounting. Once they’ve done all that and they’ve got it buttoned up Chris Nye, Stephen. We know the process, right? We’re listening to business and so on and so forth. But what what do you see as the next steps for somebody when they’re going to listen to the business with quiet light or any other firm for that purpose, if they want to maximize their exit and get an SBA buyer?

Stephen Speer  29:53

Well, I mean, part you know, we do that consulting upfront and then it’s kind of ongoing During, during, you know, let’s just say they do it a year out. It’s ongoing and then at the at the end of it then we prequalify the business formally issue a pre qualification letter. So so it quite light broker can put it in with, with the business summary. And in list that business as an SBA qualified business and a lot of buyers one thing I will say a lot of buyers when they look through those, those Sims, they they look for that SBA eligible or SBA approved indication on the SEM, they do look for that. And oftentimes if it doesn’t have that, they’ll move on to the next business. So it really kind of draws it draws buyers to your listing if you have that. listed.

Joe Valley  30:54

Yeah, I agree we we start putting it right at the on the teaser. Right, Chris? I’m sure that people see it online. And if they’re, if they’re simply looking for SBA pre qualified businesses, they’ll see it right on the on the on the listing page. Chris, if you’ve got something that’s SBA pre qualified versus not, have you tracked the volume of downloads of the SIM, and the number of ello eyes versus non or number of calls that you’d have with buyers? Just ballpark numbers? Would it be?

Chris Wozniak  31:27

I don’t have specific stats, but anecdotally, I’d say it’s to two or three to one for SBA pre qualified versus not. Wow. Yeah, yeah. And I would explain all my sellers, you know, if we can get you pre qualified, it’s a very basic thing, it opens up the the pool of buyers tremendously because it’s a million dollar business, you can either be looking for the one buyer that has a million dollars cash. And if you find a buyer that has a million cash always seems like they want to leverage their money and buy a business, that’s 5 million, you don’t want to pay cash for a million dollar company, at least in my experience. So I explained to sellers, it just opens up the pool of buyers, because they may only need 20%. down they may only need 200,000. And Stephen, I was going to ask you, what’s your thoughts on as far as from a borrower’s perspective? equity injection? Is that they have to come with a certain percentage of cash in the deal to get it done? Or is it can there be other structures that that can be considered

Stephen Speer  32:28

injection, there can be other structures that consider injection, I mean, ultimately, the minimum amount that a buyer will have to put up is 10%. There’s no way around that so of his or her own money. And the rest could come in form of a seller note, that’s very common. We’ve had clients where they quite don’t have the 10%, but they bring in a business partner that does have it in exchange for an equity stake in the business. So there are ways to getting of getting that done. But so that kind of gives you an idea, but in terms of equity injection, it does the bare minimum allowed or required by the SBA is 10%. But as you move up the food chain, you know move up to 234 million dollar acquisition, that number does go up in generally, anywhere from a 2 million to a $5 million acquisition gonna be anywhere from 15 to 20%. buyer injection of the buyers on money.

Joe Valley  33:31

What this means is there’s so many different nuances to it, for sellers and for buyers. But the most important thing I think, folks is that you actually get started so that you won’t don’t wake up Sunday and decide to sell because you’re just emotionally spent and you need to get out. Because at that point it’s almost it is too late in most situations to get maximum value to find the best buyer if the best buyer is an SBA buyer and you haven’t done this work in advance. So both buyers and sellers can reach out to you Stephen to get themselves pre qualified as a buyer or the seller. If you want to send Stephen your details and see if your business is already pre qualified. If not he’ll tell you what to do and how to fix it. Same with Chris same with myself. They know how to reach us Stephen, how do they reach you and connect with you if they want to get their business pre qualified for an SBA loan?

Stephen Speer  34:24

Well they can email me at Stephen and that’s Stephen with a pH at That’s for the seller side. On the buyer side they can either email me at that same email address or go onto our website and schedule a call with with one of our team members.

Joe Valley  34:43

And that’s, right? It isn’t ABS I will put that in the show notes as well. Chris, any last questions you want Stephen? Are we good to go here? I think we’re good. Well

Chris Wozniak  34:55

I can Can I ask one more question of course your show. Um, so Stephen can Can you talk a little bit from a seller’s perspective as we get towards the end of these deals and are getting close what’s your thought on the bulk transfer requirements from the lenders and that kind of no tax do certificates because sometimes when we as we’re getting closer toward the end of the deal those those certificates and those transfers and things getting things back from the state, they can add, you know, 1015 business days to the deal is there anything sellers can do? Kind of ahead of time? I mean, I know it’s the lenders asked for that at the time they asked for it for a reason, but is there anything they can do preparation wise to

Stephen Speer  35:32

kind of plan for that? Yes, and we we preach this right at ally start, start working on that. Unfortunately, we say that but oftentimes sellers kind of drag their feet and don’t get it done, but we Front Load it right in Li start working on that, because that is coming up more and more on deals and it can delay deals as you and I know, firsthand. Chris, but especially if it’s the state of California, you’re way behind the eight ball right now. So yeah, book sale transfers, get your attorney involved get that going immediately upon LSI and there shouldn’t be any issues Yeah.

Joe Valley  36:18

I was gonna say it was California last time I had an issue with that there’s there’s so many issues with you California just get get get in line and straight now. Come on, you’re making our lives difficult here. With that, it’s like with everything else, don’t delay. You know, don’t wait, don’t put it off until Sunday you’re gonna wake up and Sunday is here and it’s going to be too late. So sellers reach out to Stephen at Stephen@ecommercelending or go to, you can find him there. You could even probably find him on LinkedIn. But of course we’ll put it all in the show notes as well. Stephen, appreciate you joining us once again on the quiet life podcast. We’ll see you at the next event.

Stephen Speer  36:59

It’s been a pleasure, Joe and Chris. Thanks for having me on

Chris Wozniak  37:03

yesterday to talk to you.

Outro  37:06

Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast subject or guest, email us at [email protected]. Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.

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