3-Week Shutdown Reprieve Opens Door to SBA/Bank Financing for Shop Owners
Malvern, PA…January 28, 2019… Art Blumenthal LLC, an automotive aftermarket-specific business broker, is utilizing the 3-week window created by the end of the federal government shutdown to expedite the closings of tire and auto service shops that have been stalled for the past month due to lack of loan guarantee processing of the Small Business Administration, a U.S. government agency.
Blumenthal noted, “The whole system has been a logjam because the SBA had stopped issuing new loan approvals during the shutdown. Shop owners and prospective shop buyers currently in the middle of a loan transaction, even if the lender got their approval number before the shutdown, have just had to wait. Obtaining SBA loan guarantee approval usually involves necessary hurdles to overcome, as any shop owner who has gone through the process fully understands, and to get close to the finish line and then be put on hold is, of course, very frustrating.”
Blumenthal continued, “The SBA 7a loan program is one of the most popular methods for financing a well-established business acquisition that involves purchase of inventory, equipment and goodwill. Under this program, banks may fund up to 90% of the acquisition cost, plus additional working capital, to a qualified buyer candidate with a 10% cash down payment. So if someone was in the process of obtaining an SBA loan guarantee to purchase a tire or auto service business, their entrepreneurial dreams were put on hold. Established shop owners seeking funding for growth by expanding their number of sites also have had to wait.”
SBA loans are a mainstay for many entrepreneurs, who can be approved for attractive bank financing to borrow funding to buy, start, expand, or run a small business. While the SBA doesn’t directly fund small-business owners, the most popular 7a program covers 75% of loan losses in the event of a default, giving an incentive to banks and other financial institutions to finance business acquisitions that might otherwise appear to risky.
Blumenthal also said, “Like other aspects of the economy, when a business transaction like this is put on hold, it has a ripple effect that impacts a myriad of circumstances. I have a buyer client eager to close on acquiring expansion locations and a seller ready to complete a sales transaction, pay off all debts, and commence a well-deserved retirement. Eager, young entrepreneurs just acquiring a new tire or auto service shop can be negatively impacted if they are counting on an SBA/bank loan to hire new employees, purchase new equipment and inventory, renovate the building, replace signage, and implement new advertising.”