A “Pre-Qualification Letter” from a Financing Broker can be fashioned to point out the maximum loan amount allowable and that based on the information provided, the business has no financial or business issues which would impede an approval by an underwriter.
An SBA Lender will not assist a Seller with a loan “pre-qualification” to give to a potential Buyer.
A Financing Broker will be able to “qualify” your business for a future SBA Loan. This will help you in the process of deciding the value of your business and a sale price.
You will also be able to talk to the Financing Broker about the down payment required to purchase your business and if you will be offering Seller Financing as part of the transaction. (It is often beneficial to offer some Seller Financing both as a supplement to the available cash of the Buyer and to make a stronger loan submission to a Lender.
However, a “Pre-Qualification Letter” is a sales tool only. An SBA Lender will not accept a “Pre-Qualification Letter” and it will have no bearing on the Buyer obtaining a loan for the purchase of your business.
A Financing Broker will be able to point out to you any issues which will come up in the underwriting process. This will assist you in understanding if there are problems with selling your business and options to overcome these issues.
Or, whether you will need to wait to sell the business so you can go about the required repair of the present issues.
To be able to do this “qualification” you will need to provide the Financing Broker with three years of financial information and the Year to Date financial information. This includes tax returns, ‘profit and loss statements’ as well as balance sheets, inventory lists, equipment lists, account receivable and account payable reports, and any other information relevant to your business.
The above documentation will need to be provided the Buyer of your business for his loan submission to a Lender – so prepare accordingly.
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