When it’s time to sell a restaurant, most restaurant owners don’t have an exit strategy. Some Restaurant Owners think they can sell their Restaurant anytime, like a residential property. The hard fact is that only about 20%-30% of restaurants listed on the market will sell.
Restaurant owners with a plan when it’s time to exit, are usually more successful than those without. An exit strategy consists of clean books and records, updated-looking restaurants, understanding the lease, and knowing the status of the PPP loan, Economic Injury Disaster Loan (EIDL), an SBA loan.
Dallas, Texas, Restaurant Broker Dominique Maddox says, “The lack of exit strategy planning for restaurant owners is common. Most restaurant owners plan to sell a restaurant once an unexpected event triggers them”.
When it’s time to sell a restaurant: Two essential factors to consider:
Do you have an SBA loan, and your restaurant sale proceeds will not cover the balance?
Restaurant Broker advice: Contact your SBA lender to let them know you are selling your Restaurant. Find out your options if the sale proceeds will not cover your loan balance. The lenders usually agree to drop the lien on the assets when the Restaurant is sold to a buyer.
The remaining balance Restaurant owner would have to pay back like a personal loan and would be a personal guarantor on the remaining balance.
Balance owed $200,000.
Sell the Restaurant for $125,000 and receive $112,500 after Broker’s Commission.
Personal Guarantor for $200,000 – $112,500 = $87,500
Do you have an Economic Injury Disaster Loan (EIDL)?
The EIDL loan cannot be forgiven, and the payments usually begin 30 months after the disbursement date. Even if the Restaurant closes, the lender can claim and sell your personal assets. The lender can claim the assets of any individual that signed the loan documentation as a personal guarantor.
Restaurant Broker advice: Know the balance of your EIDL loan. Contact an experienced Restaurant Broker for a complimentary restaurant valuation. Knowing the restaurant valuation will help the restaurant owner understand the potential value of the Restaurant and if it makes sense to try to sell the Restaurant.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Texas Restaurant Broker Dominique Maddox at 404-993-4448 or email at firstname.lastname@example.org. Visit our website at www.EATSbroker.com
Buying a Restaurant with SBA lending is a great opportunity for buyers to finance up to 90% of the total acquisition cost. Restaurant Acquisitions are eligible for Small Business Administration (SBA) 7(a) loans, but the process can be time-consuming and requires many supporting documents.
The restaurant buyer’s and the restaurant seller’s financial documents must be approved for bank lending. Both parties have different duties during the due diligence process for SBA bank lending.
Buyer Documents required for SBA lending:
-Last three years of personal federal tax returns and W-2’s
-Copy of Asset Purchase Agreement or Letter of Intent (LOI)
-SBA Form 1919-collects information about the applicant
-SBA Personal Financial Statement is known as form 413
-Credit Authorization for the lender to obtain a credit report
-Business license and registration
-Copy of current commercial real estate lease(if not buying the building)
-Collateral-is needed for most loans but not all
-Proof of Buyer’s Equity Injection 10%-20% required-can be gifted funds if it doesn’t have to be paid back to the original source.
*Depending on the buyer, SBA will only require a 10% equity injection from the buyer. This injection can be made in various ways. The buyer can provide the entire 10% equity or 5% seller financing and 5% buyer down payment.
Seller Documents required for SBA lending:
-Recent three years of business federal tax returns
-Current Profit and Loss Statements and Balance Sheets
-Broker’s Price Opinion or Confidential Information Memorandum
-4506T form-request for transcript of tax return directly from the IRS
-Bank statements can be requested
The U.S. Small Business Administration (SBA) doesn’t provide business loans, but partially guarantees loans that banks and other lenders make to small businesses. By partially guaranteeing the loan, they will eliminate some risk and encourage lenders to make loans to small business owners.
Buying a restaurant with SBA lending is
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or by email at email@example.com. Visit our website at www.EATSbroker.comRead More