SBA Broker
December 12, 2024
by a searcher from Texas A&M University in Cedar Park, TX, USA
I'm considering engaging with an SBA Broker to move forward with an acquisition opportunity for my business. Any advice on what to watch out for or expect when signing an agreement?
from University of North Texas in San Antonio, TX, USA
-Clarity on Scope of Work: Ensure the agreement clearly outlines the broker's responsibilities—are they assisting with just deal sourcing, or will they also handle financing, negotiation, and due diligence support?
-Fee Structure: Understand how and when they get paid. Most brokers charge success fees (typically a percentage of the deal size), but watch out for upfront fees or retainer requirements. Make sure you're comfortable with the terms and align the fee structure with your budget.
-Exclusivity: Many SBA brokers will ask for exclusivity over a set period, meaning you can't work with other brokers simultaneously. Make sure the exclusivity term is reasonable and aligns with your acquisition timeline.
-Termination Clauses: Review what happens if you decide to terminate the agreement early. Are there penalties? Can you negotiate an out if the relationship isn’t working?
-Experience in Your Sector: SBA brokers vary in their expertise. Make sure they have a proven track record in your target industry or with similarly sized deals.
-Alignment with Your Vision: Ensure they understand your acquisition criteria (industry, geography, EBITDA, etc.) and aren’t pushing deals outside your scope just to close a transaction.
-Post-Deal Support: Some brokers offer post-closing support, especially when financing through SBA loans. Ask about their involvement after the deal is done to ensure the transition goes smoothly.
-Do Your Homework: Take the time to interview multiple SBA brokers to compare their experience, fee structures, and approach. Not all brokers are created equal, and the right fit can make or break your acquisition process.
-Engage Multiple Financing Sources: Don’t solely rely on one bank or financing source. Speak with several SBA lenders to understand their terms, appetite for your deal type, and track record with small business acquisitions. Different banks may offer more competitive rates, better terms, or a faster process.
-Legal Review: Finally, have an attorney review the broker agreement to ensure you’re protected and that the terms align with your interests.
Doing your due diligence upfront will save you time, money, and headaches down the road. A good broker and lending partner can be game-changers for your acquisition, so it’s worth investing the time to find the right fit.
Good luck with your acquisition!
from Bentley College in Miami, FL, USA
-- https://www.duedilio.com/10-essential-questions-to-ask-a-business-broker/
-- https://www.duedilio.com/dealing-with-dishonest-business-brokers/
-- https://www.duedilio.com/the-real-value-of-business-brokers/