SBA Loan Changes 101: How Do They Impact Buying and Selling a Business in 2023?
SBA Loan Changes 101: How Do They Impact Buying and Selling a Business in 2023? Written by, The BizBuySell Team in Business Financing, Business Trends, Buying a Businesss, Franchising, Selling a Business By Lauren Mauldwin, Christine McDannell, and Khaled Azar On May 10, the United States SBA (Small Business Administration) announced new updates to the SBA 7(a) and 504 programs. Used properly, these can achieve massive leverage in an acquisition, making it easier to buy/invest in businesses or sell your current one. Since the full SBA Standard Operating Procedures are quite extensive, here's a simple snapshot of five key takeaways that are most relevant and how they can benefit you. 1. Permitting Partial Changes in Ownership The SBA has lifted the requirement for a "complete" change in ownership of a business. As of May 11, 2023, they allow loans for partial ownership changes. Why it matters: This is a big deal. Owners can now sell a portion of their stake in an entity while staying on as a part-owner or employee. Buyers, on the other hand, can expand their reach investing in businesses and get more creative with partial acquisitions. This also broadens opportunities for unique deal structures and succession planning loans. 2. Reduction of Insurance Requirements The SBA is removing the requirement for hazard insurance on SBA loans up to $500,000 (although real estate is an exception). This is a notable shift from the original $150,000 - it means that loans under the $500K mark have fewer hoops to jump through. Also, life insurance is no longer required for 7(a) or 504 loans. Why it matters: This simplifies the loan process, removes barriers to entry and reduces paperwork. 3. Streamlined SBA Lending Criteria The SBA has shaved down the criteria to qualify for loans under $500,000, making it much simpler than before. Now, there is less due diligence and required paperwork - letting individual lenders use their own process to determine whether an applicant is ‘creditworthy’. SBA lenders can now use modern underwriting tools, including credit scoring, and can take the applicant’s income and collateral/assets into account when assessing the loan. Why it matters: This helps move the underwriting process along more effectively, making it easier to access SBA loans. 4. Broader Affiliation Rules The SBA is modifying affiliation rules for granting loans, making them less exclusionary. This is good news because their affiliation standards have been fairly extensive in the past, especially for small businesses - entities with ‘control’ over the business counted as ‘affiliated’. Moving forward, lenders will not have to consider as many factors as ‘affiliation’. For example, they are no longer considering Common Management, Identity of Interest, and Franchise / License Agreements as affiliation. Instead, affiliation will be determined by a percentage of ownership of the entity - much simpler. Franchises were once excluded from SBA loans due to affiliation rules, but the new, broader rules will include them. Why it matters: This opens up opportunities for more businesses to access funding. Fewer restrictions have made the process more accessible. 5. Simpler Process for Injecting & Verifying Equity Under the new changes, startup businesses no longer have an equity requirement - instead, this will be done on a case-by-case basis by each bank. Buyers acquiring a pre-existing business will need to inject a minimum of 10% of the total acquisition. Seller-carried financing can also qualify here. Why it matters: On both sides, lenders now have fewer requirements by the SBA and can use more of their own discretion/policies to determine equity. In Conclusion: It’s fair to say that a significant amount of red tape has been removed from the SBA loan process. This puts entrepreneurs in a better position than ever to sell and acquire businesses, with fewer limitations than before. The best part? By knowing these shifts, you can now get more creative in structuring deals to make them come together.
Who Pays Closing Costs? What Homebuyers Should Know
When it comes to real estate transactions, it’s easy to focus on the initial, upfront expenses. If you’re the buyer, these immediate expenses can include the home’s purchase price and down payment. If you’re the seller, they can involve repairs, renovations, and improvements to get the home ready to be sold. Before a real estate transaction can be completed, the matter of closing costs needs to be discussed. Salmon Real Estate helps individuals buy and sell homes on Staten Island, New York, and offers listings of various property types in the area. Here, the team explains who usually pays closing costs and what homebuyers need to know when negotiating them. What Are Closing Costs? Lenders charge fees in exchange for their services in creating a home loan. Those fees are what are known as closing costs. They cover things such as the home appraisal and searches on the home’s title. The amount that needs to be paid often will depend on the type of loan and where you live. Closing costs are so named because they are the final step in the transaction process. They are due before the keys can be handed over. Closing costs are paid when the buyer and seller meet with the closing agent, title company, or attorney to disburse the funds and sign the documents to make the sale final. By law, both the buyer and seller will receive closing documents that provide the details of the transaction at least three business days before closing. These documents will include an itemized list of closing fees for both parties. Who Is Required to Pay Closing Costs? When it comes to closing costs, generally, both buyers and sellers are responsible for paying them, although, negotiating power can depend heavily on the current market (see the market snapshot). While both buyers and sellers pay closing costs, the buyer usually is responsible for the bulk of the closing fees in a real estate sale. In most cases, closing costs for sellers are deducted directly from the home sale proceeds, while buyers typically pay their portion out-of-pocket. To help minimize the financial burden of closing costs, homebuyers can negotiate with a seller to help cover costs. This is called seller concessions, and it can be extremely beneficial to buyers who believe they will have difficulties coming up with the money needed to close the deal. However, there are limits on the amount that sellers can offer toward closing costs, as they are only allowed to contribute up to a certain percentage of the mortgage value. A breakdown of the fees in the typical closing costs for buyers includes: Attorney fees Loan organization fee Appraisal fees Processing fee or underwriting fee Credit report fees Home inspection fees Escrow and signing Recording fees Title search fee and title insurance A breakdown of the fees in the typical closing costs for sellers includes: Transfer taxes Title insurance Escrow fees Attorney fees Outstanding amount owed on the mortgage Real Estate Expertise at Salmon Real Estate Real estate transactions often can be confusing and overwhelming processes, but the team at Salmon Real Estate has got your back. We specialize in buying and selling a variety of property types on Staten Island, NY, acting as a guide for our clients and answering any questions they may have, such as who pays for closing costs. Salmon Real Estate is one of the oldest independently owned real estate companies on Staten Island and has valuable experience and resources to help you buy or sell property. Contact us today to learn more about our Realtors and how we can help you acquire your dream home.
Spring into Action: Boost Your Home's Curb Appeal with Expert Guidance
Spring into Action: Boost Your Home’s Curb Appeal with Expert Guidance To sell your home this spring, it may need more preparation than it would have a year or two ago. Today’s housing market has a different feel. There are more homes for sale than there were at this time last year, but inventory is still historically low. So, if a house has been sitting on the market for a while, that’s a sign it may not be hitting the mark for potential buyers. But here’s the thing. Right now, homes that are updated and priced at market value are still selling fast. Today, homes with curb appeal that are presented well are still selling quickly, and sometimes over asking price. According to Danielle Hale, Chief Economist at realtor.com: “In a market where costs are still high and buyers can be a little choosier, it makes sense they’re going to really zero in on the homes that are the most appealing.” With the spring buying season just around the corner, now’s the time to start getting your house ready to sell. And the best way to determine where to spend your time and money is to work with a trusted real estate agent who can help you understand which improvements are most valuable in your local market. Curb Appeal Wins One way to prioritize updates that could bring a good return on your investment is to find smaller projects you can do yourself. Little updates that boost your curb appeal usually work well. Investopedia puts it this way: “Curb-appeal projects make the property look good as soon as prospective buyers arrive. While these projects may not add a considerable amount of monetary value, they will help your home sell faster—and you can do a lot of the work yourself to save money and time.” Small cosmetic updates, like refreshing some paint and power washing the exterior of your home, create a great first impression for buyers and help it stand out. Work with a real estate professional to find the low-cost projects you can tackle around your house that will appeal to buyers in your area. Not All Updates Are Created Equal When deciding what you need to do to your house before selling it, remember you’re making these repairs and updates for someone else. Prioritize projects that will help you sell faster or for more money over things that appeal to you as a homeowner. The 2022 Remodeling Impact Report from the National Association of Realtors (NAR) highlights popular home improvements and what sort of return they bring for the investment (see graph below): Remember to lean on your trusted real estate advisor for the best advice on the updates you should invest in. They’ll know what local buyers are looking for and have the latest insights of what your house needs to sell quickly this spring. Bottom Line As we approach the spring season, now’s the time to get your house ready to sell. Let’s connect today so you can find out which updates make the most sense.
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