CBB CBB Buyer Qualification & Acquisition Financing 1 — Questions and Answers
Question 1: What is the first step a CBB broker should take when working with a prospective business buyer?
- Show them all available business listings immediately
- Qualify the buyer by assessing their financial capacity, experience, and acquisition goals (Correct answer)
- Have them sign an exclusive buyer representation agreement
- Introduce them to SBA lenders for pre-approval
Correct answer: Qualify the buyer by assessing their financial capacity, experience, and acquisition goals
Buyer qualification ensures the broker focuses time on serious, capable buyers and matches them with appropriately sized and typed businesses.
Question 2: What financial information does a broker typically request from a prospective buyer to assess their qualifications?
- Only the buyer's annual salary
- Personal financial statement, liquidity proof, and credit history (Correct answer)
- Business plan for the target acquisition
- Reference letters from previous employers
Correct answer: Personal financial statement, liquidity proof, and credit history
A personal financial statement and proof of liquidity confirm the buyer has sufficient capital for the down payment and reserves required to close.
Question 3: What is an SBA 7(a) loan most commonly used for in business acquisitions?
- Financing the purchase of commercial real estate only
- Funding the purchase of existing businesses, including goodwill and working capital (Correct answer)
- Providing operating capital for start-up businesses
- Refinancing a business owner's personal mortgage
Correct answer: Funding the purchase of existing businesses, including goodwill and working capital
SBA 7(a) loans are the most common source of acquisition financing, covering purchase price, goodwill, working capital, and associated closing costs.
Question 4: What is the typical maximum loan amount for an SBA 7(a) business acquisition loan?
- $500,000
- $1,000,000
- $5,000,000 (Correct answer)
- $10,000,000
Correct answer: $5,000,000
The SBA 7(a) program offers loans up to $5 million, making it suitable for a wide range of small and mid-sized business acquisitions.
Question 5: What minimum equity injection do SBA lenders typically require from a buyer in a business acquisition?
- 5% of the purchase price
- 10% of the purchase price (Correct answer)
- 25% of the purchase price
- 50% of the purchase price
Correct answer: 10% of the purchase price
SBA lenders typically require at least 10% equity injection from the buyer, with seller financing potentially counted toward this requirement.
Question 6: Which document formally requests financing from an SBA lender for a business acquisition?
- Letter of intent (LOI)
- Loan application package with business and personal financial statements (Correct answer)
- Confidentiality agreement
- Business broker listing agreement
Correct answer: Loan application package with business and personal financial statements
An SBA loan application requires detailed business financials, personal financial statements, business plan, and acquisition documents.
CBB CBB Buyer Qualification & Acquisition Financing 1
What is the first step a CBB broker should take when working with a prospective business buyer?