Getting the Damn Money

getting the money

Eeny, Meeny, Miny, Moe—Oh to what bank should I go?

This children’s rhyme is the adult version of deciding which players you want on your team when you go to sell your business or buy a business. Regardless of your position, a buyer or a seller, getting the money in your hands is the name of the game; choosing the wrong people on your team could mean a fatal loss. It goes without being said that a damn good Business Broker is the most crucial player on your team, but at some point in the transaction, the bank and the banker (individually) become even more important than the broker. If the bank or the banker isn’t motivated to do the deal, you could be heartbroken and your dreams could be dashed.

If you are a seller attempting to sell your business, you should be just as motivated to get the deal done at the bank as the buyer is, and vice versa. After all, much of one’s comfort in getting on a plane is that you know the pilot wants to survive as well!

We have seen many deals go south and it devastates the business owners’ hearts, and the dream of selling becomes a nightmare. Keep in mind that a seller wants to walk away into semi-retirement or even to fully retire; it is part of his retirement plan.

Likewise, if you are working in corporate America hell, and you wish to lose your 6 bosses and the agonizing J.O.B. (Just Over Broke), and the bank and the banker don’t engage in the deal with as much veracity as the seller and buyer, you face getting so close to owning a Business that if you must continue to work for the man; it becomes incredibly painful. The pain is exacerbated.

This is where passion and pain come colliding together for the worst for both parties. Who is at fault in this scenario? The answer might surprise you; it’s the Business Broker 90% of the time. But why?

1. Business Brokers must know how to structure a deal for the bank.
2. Business Brokers must know how to price a deal, to begin with
3. Business Brokers must rub elbows with the banks, to get a feel for what the various banks are looking for in deals; not all banks want all deals.
4. Banks are notorious for their culture-changing, management changing what appetite they have to hold or to sell the paper; changing the attitude and selectiveness of what they will and will not lend on. Business Brokers should know which banks are lending, and which ones are not. In addition, the Business Broker should know what banks are going to put the buyer and seller through hell, and which ones are not.

But why do banks change their appetite?

1. A lending portfolio, simply put, is a file cabinet full of risk with a monetary reward tied to the entire portfolio. Banks are continually looking at the quality of what they are lending on and will make a snap decision on a routine internal audit of their portfolio; based on risk and marketability of the portfolio.
2. This change in the appetite is often driven by a bank’s decision to either hold or sell the portfolio. Simply put; if a bank wants to hold the note rather than sell it off, they will be making real conservative decisions when lending for an acquisition.
3. Politics and market volatility plays a big role in what banks will do. In the 2008 recession (depression some say), the banks tightened up and it was tough to even get a mortgage, even if you qualified. The banks are not much different than you and me; they don’t want to lose money so they may flinch and watch how they behave with their money in times of possible famine. We are all loose on spending when it’s time for a feast, but famine is inevitable at some point. Banks are watchful of the economy and the outlook ahead.

But why don’t banks tell you if they want deals or not?

1. Banks will hold their cards close to their chest; they don’t want to be “known” as a bank that isn’t hungry for deals. Instead, they will cherry-pick deals they want to do and issue more turndowns than acceptances.
2. Banks will want to promote they are an SBA lender so they can be a player in the market, but “some” banks are incredibly hungry to do SBA loans and stand a head and shoulder above the other banks in the market. In fact, a few of the biggest banks that you know are NOT lending on SBA loans as much you may think. So, they promote they are in business to lend you the money for a Business Acquisition, but after 6 weeks of playing their game, you may be only tired and frustrated with no money in your hand to complete the transaction.

So, What Do You Do?

1. Choose a damn good Business Broker. Look for the ones that are hungry, who answers their phone, and who are connected to the banks. These are the ones who will prevent you from a wild goose hunt and leave you exhausted with no result.
2. Trust your Business Broker to find you the money. After all, he is the pilot in the above analogy. Naturally, he wants to get to a safe landing as well.
3. DO NOT think that because you “know a banker” you are going to get the deal done. The art of getting the money in your hands has literally NOTHING to do with who you know, it has to do with how motivated the banks are at the time, where their portfolio is at, and how well informed the Broker is of the current climate of the banks in the market.

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