CBB Buyer Qualification & Acquisition Financing Flashcards

What is the first step a CBB broker should take when working with a prospective business buyer?

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.

What financial information does a broker typically request from a prospective buyer to assess their qualifications?

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.

What is an SBA 7(a) loan most commonly used for in business acquisitions?

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.

What is the typical maximum loan amount for an SBA 7(a) business acquisition loan?

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.

What minimum equity injection do SBA lenders typically require from a buyer in a business acquisition?

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.

Which document formally requests financing from an SBA lender for a business acquisition?

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.