Does Your Business Need to be Lender Pre-Qualified Before You Sell It?

Planning on selling your business? Make sure you get it lender pre-qualified first! Read more about it in this blog.

If you’ve been meaning to put up your businesses for sale and have been browsing listing options, you may have come across the term “Lender Pre-Qualified” one too many times. Don’t disregard this label! It may not sound fancy, but having this label next to your business listing can be the factor that makes or breaks your sale!

Confused about how what the term means and how it can benefit you? This blog covers lender pre-qualification in detail and discusses why business owners in Florida need to get behind this trend ASAP.

What Does “Lender Pre-Qualified” Mean?

When a business for sale is labeled as “lender pre-qualified”, it simply means that a lender has examined the financial documents of said business and has deemed it eligible for a business loan. It means that the lender has crunched the numbers, evaluated the debt coverage, and has potentially taken the salary of the new business owner into account. “Lender pre-qualified” also communicates that the lending institution is confident about the business repaying a loan it may take in the future.

Lender pre-qualified doesn’t guarantee that the business will receive a loan. However, it does put the business in a favorable light and tells buyers that the asking price listed by the seller is set as per the buyer’s benefits.

What’s the Lender Pre-Qualification Process Like?

When setting up a business for lender pre-qualification, all relevant business information and financial documents are collected and compiled. These are then sent to one or more SBA lenders who conduct thorough evaluations of the business. They go through the financials to determine if the business listed for sale is eligible for an acquisition loan.

If the eligibility criteria is met, then the lending institute offers a pre-qualification letter that clearly states the amount they’d be willing to loan. The letter also outlines the amount needed by a potential buyer and the percentage rate, among other details. Since each lending institution has its own SBA requirements, the loan amount may vary from one lender to another. This is why sellers are encouraged to approach multiple lenders for the pre-qualification process so that they may enhance their chances of getting pre-qualified for bigger loans.

How Does Getting Lender Pre-Qualified Help Sellers?

So, why should you consider getting lender pre-qualification for your business? Well, because doing so significantly increases your chances of selling your business. SBA financing is a popular form of conducting sales and it definitely helps business owners streamline the process.

Getting lender pre-qualified also tells you a couple of interesting things about selling your business. It gives you insight into whether or not there’s a real possibility for a potential buyer to get financing for the business. This then helps you in the negotiating process and gives you an upper hand as you’re already aware of your options.

Another thing you get to learn during the lender pre-qualification stage is if your selling is market competitive. Lenders don’t typically loan businesses if the selling price is too high. Approaching multiple lenders gives sellers an insight into whether or not they need to lower their selling price.

In case the lender feels that the financials aren’t strong enough, they may also ask business owners to make down payments.

How Does Getting Lender Pre-Qualification Benefit Buyers?

Sellers aren’t the only ones who benefit from pre-qualified business listings. The act of lender pre-qualification helps buyers as well.

Many investors and buyers prefer purchasing an existing business instead of getting involved with start-ups or new franchises. Existing businesses already have an established clientele, existing cash flow, tried and tested operating systems and processes, and trained employees. Add to this a lender pre-qualification, and the deal is even more appealing to buyers. It gives them confidence in pursuing a business up for sale because they’re assured that the financials have been examined and approved.

Lender pre-qualified also tells them that the lender that has deemed the business eligible is likely to provide the new owner a business acquisition loan in the future. In short, it convinces buyers of the business’s potential.

Want to sell your lender pre-qualified business in Florida? You’ve come to the right place. The Business Exchange of Florida is a leading business and real estate brokerage firm in Florida that specializes in dealing with small to multi-million dollar businesses. In addition to this, we also accommodate commercial real estate investments. Over the last several years, we’ve helped countless buyers and sellers successfully actualize their investment goals by extending our buying and selling services to a diverse range of businesses. We cater to various business categories in 67 counties in The Sunshine State.

For more information about our work and how to go about the lender pre-qualified business selling process, give us a call at 1-561-602-2519.  You can also connect with our company on Facebook or LinkedIn. We look forward to hearing from you!