It can be a tedious process to sell your business. One way to speed it up is to get your business preapproved for financing. In this article, we’ll help you work through the steps you’ll need to take.
What is preapproval?
Before your sale, you can have a bank review your business's financials and profitability metrics and determine whether it can qualify for financing.
Knowing whether your business can be approved for financing is important for future buyers. Here's why: Statistically, most buyers turn to banks to help them cover the costs of acquisition.
And, because banks look at the business’s financials rather than the buyer’s, preapproval is a great reassurance that your business is in good order and positioned well financially to attain favorable financing.
Which banks will help me with this task?
You can have any bank begin the process of preapproval. However, some banks don’t offer SBA financing, a form of funding your buyer may depend upon to cover their acquisition costs. If possible, work with a bank that offers SBA loans and other forms of financing to streamline the financing process for your buyer.
|Your buyer doesn’t have to use the bank you used to attain preapproval. However, knowing that a bank has preapproved your business can build confidence among your buyer base that financing is an option.|
How will preapproval speed up my sale?
With most banks, the preapproval process can take several weeks. Buyers who must take on this task will need to delay closing on your business by this amount of time.
If you choose to work through the preapproval process at the beginning of the process—while completing other essential pre-sale steps—you may be able to sell your business more quickly.
What steps will I need to take?
First, find a bank that offers SBA loans, term loans, and other options for covering the cost of acquisition.
|Use the SBA’s Lender Match tool to find a bank in your area.|
After choosing a bank, ask about the documents you’ll need to submit to attain preapproval. Here's what is typically requested:
- A business plan
- Personal and business financial statements
- The last three years of personal and business tax returns
- A completed loan application
- A signed authorization for credit and background checks
- Your resume and the resumes of other key personnel in your business
Once you submit these documents, your bank will review your request. If everything is in good order and your business meets its lending criteria, you may receive a preapproval letter within two weeks.
Who can help me with this process?
Work with one of the following pros to help you get your business preapproved for financing:
An accountant can help you prepare your financial statements and gather your tax returns. You can find some business-friendly firms here:
Business plan writer
A business plan writer can take on the task of preparing your business plan. Expert writers will know the core components that should be included in your plan and can work quickly to create it. You can connect with a business plan writer through the following link:
If you’re working with a business broker, you can often receive guidance through the entire preapproval process. If you haven’t yet found a business broker and would like to work with one, click the Connect button below to meet with a few who cover your market:
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