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Wednesday, July 30, 2008

Daily Observations - Seller Requirements

Tonight's note is short and sweet and to the point. I did not want to cloud this message with a lot of info, b/c this is CRUCIAL.

A new requirement now stipulates that the analysis must show how the change of ownership will benefit the business, not the seller or the business buyer. Therefore as business brokers part of your write up during the submission of the loan process should definitely address the issue as to why the business will now benefit from the change of ownership.

Another new requirement is the obligation of the lender to discuss with the seller- seller financing. What this actual requirement means is that seller financing needs to be requested in all transactions.

The amount of the seller financing should be equivalent to the total amount of dollars for the acquisition of all intangible assets such as goodwill. There is no requirement that the seller has to carry paper, as of this update.

However, it seems very clear that the SBA is leading towards the seller carrying a significant amount of the goodwill. The only requirement as of today is that the lender must document that they requested the seller to carry the paper. And that the seller has therefore refused or state the amount the seller is agreeing to carry. Visit Loanforbiz for more info.

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