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Monday, July 28, 2008

Daily Observation - SBA Changes; Experience

One of the biggest changes we have seen over the last couple months is the requirement of the buyer. to have direct experience in a related industry of which they are purchasing the business. The lenders today are no longer stretching their classification of related experience. If the buyer does not have direct experience as an owner, not as an employee or manager, the lenders are not interested in financing their new acquisition.

The only area where a direct employment experience is transferring is within the retail sales industries. For example, where an owner of a hardware store now wants to buy a sporting goods store without any direct experience in the sporting goods industry, the lenders most likely would see this as a transferable experience.

Experience is becoming a very crucial area that needs to be satisfied before a lender will approve new SBA financing. As business brokers, you should be very aware of the previous experience that your buyer has, and try to ensure that there is a direct transferable experience. One way of getting around this strict requirement is for your buyer to partner up with someone who has direct experience. The only problem with this suggestion is that that individual with experience would have to become a guarantor on the loan, as well as the individual without the experience. Visit our SBA based website for more information.

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