If you’re trying to sell a business, the biggest obstacle you’re likely to face is financing. Finding a buyer who has enough liquid capital, as well as a lender who can help them meet the full asking price of your business, isn’t always easy.
But there’s some good news. Here in the US, the generous terms offered by Small Business Administration (SBA) loans make financing much more achievable for deals up to $5m. And there’s a powerful tool that sellers can use to make their business more appealing to buyers, and much easier to sell.
Alongside our partners LoanBox, we can help you conduct a free Loanability Study on your business. The loanability study is conducted alongside a network of SBA banks, who will examine your latest tax returns and P&L statements to create a draft bank term sheet. This gives you detailed insights into how much liquid capital a buyer would actually need to buy your business, and lets you demonstrate a clear and achievable path to acquisition.
The study will also help you understand what a realistic deal structure would look like, how much seller financing you should think about offering and, most importantly, how much money a bank is really willing to put behind the purchase of your business.
Tip: If you're thinking about selling your business, you can create a listing on BusinessesForSale.com and test the market for free.
The Power of Pre-Approval
Let’s get into a real-life example, to show just how powerful this can be. LoanBox recently conducted a Loanability Study for a business listed on BusinessForSale.com which was valued at $1.25m. The bank term sheet pre-approved $1m of funding, and the seller agreed to offer $120k of seller financing.
This meant that a buyer would only need $130k of liquid capital to acquire a business valued at almost ten times that amount. Armed with this information ahead of time, the seller was able to advertise this fact on BusinessesForSale.com. As you might expect, they have received a large number of enquiries since!
Transparent financials are one of the biggest green flags that a buyer looks for when searching for something to acquire. A loanability study can showcase that, and it can also showcase the fact that your business is authentic and has high potential for growth. Buyers don’t need to take your word for it – they can see it clear as day in the numbers provided by the banks.
How Does the Loanability Study Work?
Here’s how the process works. The first stage is an automated evaluation, where you complete a short questionnaire to receive a pre-qualification letter. This questionnaire will give you clarity on questions such as:
- Does my business qualify for a buyer to obtain bank financing?
- Could a buyer purchase with little or no cash down?
- Will seller financing be needed, and if so, how much?
- Is my asking price in line with what a bank will support?
- Would I be better positioned selling to a competitor, key employee, or outside buyer?
- What additional information would strengthen a full pre-approval?
The next step is a human review, where your business will be officially pre-approved for lending. Here you upload key documents such as financial statements and tax returns, before speaking with a Loanbox advisor. They will review everything, address potential red flags, and engage lenders to confirm realistic deal structures.
At this stage, you’ll receive your official pre-approval letter, outlining the loan amount, terms and payment structure which a bank would lend to a qualified buyer to purchase your business. This is a powerful tool for attracting cash-ready buyers to your business.
Darin Manis, CEO & Loan Advisor at LoanBox, explains why the study can be so powerful for sellers: “A well-prepared business that ‘passes the lender test’ often sells faster and on better terms for everyone involved. Buyers who will need bank financing to acquire are first drawn to businesses where a bank has already reviewed the seller's financials and is ready to lend for the purchase.”
Start Your Free Loanability Study Today
If you think a loanability study could make your business more appealing to buyers, you can click here to get started with your pre-qualification questionnaire.
If you want to read about a high-value business that sold through BusinessesForSale.com’s premium buyer qualification service, explore this case study: How to Turn a Profit Selling a High-Value Business.