In an attempt to stimulate the small business economy, the Federal Government initiated a number of programs under the CARES Act. Most notable are the Payroll Protection Program (PPP) and Economic Injury Disaster Loan (EIDL). There are also numerous other provisions relating to direct payments, retirement account loans and distributions, and payroll tax deferrals. One benefit that has not received as much publicity, probably because it applies to fewer parties, is the forgiveness of six months of SBA loan payments (covering both principle and interest) for buyers of businesses that close on a transaction and get their loan fully-funded prior to September 27, 2020. This can be a significant benefit to business buyers as they transition into business ownership and build working capital.
This is a time sensitive benefit due to the September 27th deadline. At the time this article is being distributed, that leaves approximately two and a half months to find, negotiate, complete due diligence, close, and fund a transaction. Although doable for a confident buyer with a team of advisors in place, the window of opportunity is slowly closing. Several of the lenders that fund business acquisitions have indicated to us that they anticipate a last-minute rush to take advantage of this benefit and suggest getting your loan application in as soon as practical. To provide an order of magnitude to this benefit, we have a transaction in process that is scheduled to close on September 1, 2020 and the buyer has indicated to me that the program is worth over $250,000 to him.
For more information relating to the loan forgiveness program, please contact us. We may be able to make appropriate introductions to complete a transaction in a timely manner.
(originally published in the July 2020 eNewsletter)