If you’re in the process of selling your franchise, you may be wondering how the government shutdown will affect your buyer’s ability to get SBA funding. We’ve spoken to several lenders who specialize in financing small business sales using SBA funding. The good news is that they aren’t worried about the shutdown at all. Here’s what they told us:
The government shutdown will end at some point. Even if we don’t know precisely when, we do know that government functions will resume. Most lenders are conducting business as usual, processing loan packages as if there was no shutdown. When the lights go back on, buyers and lenders who are ready will be the first back in the pipeline. We don’t know what the backlog will be or how that might slow down processing, but we know that things will return to normal eventually.
Selling your business is a process that takes months, so by the time you accept an offer, the effects of the shutdown will be a known quantity. We know that loans that are already in the approval process are progressing (although there are delays because the SBA is operating with fewer staff), and critical functions, like verifying financial information with the IRS, are paused. Once funding resumes, we’ll have more information about processing and approval delays. Your sale may take more time, but you’ll have a better idea of how much more, so you can plan for it and around it.
There are plenty of alternatives to SBA funding. Qualified buyers have several options for financing a deal, so they may simply decide to use another source. We have a franchise buyer who is going to use a home equity loan to finance the purchase so he can get it done quickly. He plans to refinance through the SBA when things get back to normal. According to a U.S. Chamber of Commerce report, 78 percent of small business entrepreneurs use personal funds to start their businesses, so the number of sales dependent upon SBA funding is a relatively small percentage.
If you’re concerned that the shutdown will affect your sale, the best thing you can do is ensure you understand your options. Your buyer should maintain regular communication with their lender to receive the latest updates on their specific loan application and understand how the shutdown is affecting it. If the delays are going to move your sale timeline beyond what you are willing to accept, you may need to move on to another buyer who has another financing option available.
In 2024, we averaged 4.2 qualified offers for every unit of The UPS Store we sold (and we’re on track for that this year, as well). We know there is great demand for your franchise, and we have a database of qualified and motivated buyers who are ready to make an offer on a business just like yours. If we can help you value and list your business, click here to get a complimentary and confidential opinion of value.
