Common Broker Tactic or something else?

September 17, 2022

by a searcher from Western Illinois University in St. Louis, MO, USA

I requested more information about a listing and the broker asked for a 15-minute call. The listing was under LOI and none of their other listings are in my target geography, but I figured it can't hurt to network.

I think I might have said 3 sentences over 45 minutes on the phone.

Without asking me any questions, he essentially tried to explain why I would never be able to buy a business like the one I asked about.

After the call, I was full of self-doubt and discouraged, but that quickly passed.

Not all brokers are created equal. First time I've ever had an experience like this. Note to Self: Consider the source

highlights of the wisdom he offered

search funds (even though I'm self-funded): "Got to watch out for those. They'll use you to source the deal and cut you out" "You have to have an MBA from Harvard and bring $1M to the table"

banks: "They don't care about your credit score or if you have a $5M net worth. They won't lend to you if you don't have experience in that industry."

white collar owners: "every white collar guy that buys a blue-collar business fails"

seller financing: "Any quality deal will have at most a 5% seller note"

SBA lenders: "10% down is just for marketing. No deal ever gets done close to that amount"

Reply by an intermediary
from Boise State University in 800 W Main St, Boise, ID 83702, USA

Sorry for your negative experience. As stated previously, the broker may have been dealing with lots of "looky lou's" that talk big but are unable to follow through. As a professional business broker, I want to talk to a potential buyer to learn about you, your background, experience, funding source, how long you've been searching, how many offers you've made, what interests you about this deal, whether you will operate the business or attempt to operate as an investor, how you'd like to structure the deal, etc. Also, I can tell you that in order to get bank/SBA financing, your credit score matters and your experience matters. It is best if you have industry experience, but sometimes related experience works. By the way, I was a Commercial/SBA lender for over 20 years prior to becoming a business broker for over 12 years.. Most of the deals I do are funded by SBA loans. Yes, 10% down SBA deals work and sometimes even less! Getting a seller note is sometimes a requirement especially on service-type businesses that have very little tangible assets. Each deal is different just like each buyer and seller are unique. If you are serious about buying, keep looking, and ask questions and find professionals to work with you.

Reply by a searcher
from State University of New York (SUNY) in Buffalo, NY, USA

I think you have to understand where the broker is coming from. He likely deals with a lot of tire kickers who dream of buying a business but have no way of really executing. It’s on a buyer to sell the broker on their ability to get the deal done. It sounds like he wrote you off too quickly regardless, which is his loss.

I can confirm 10% SBA deals get done for the right company and price. Just takes time to find them.

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