Sellers
Loan Advisors to Selling Advisors
An Ounce of Prevention is Better Than a Pound of Cure
Sell-Side M&A Lending Consulting
Loan Advisors to Selling Advisors
Preventing Lending M&A Requirements From Preventing Your Deal Structure
Since loan programs dictate the M&A deal structure, sellers should dictate the loan program
External financing is likely to play a key role in your buyer’s ability to finance the acquisition of your practice or with a junior partner buying out the equity of the senior principal.
Your buyer is likely going use one of these loan programs: Conventional, Tri-Party, or the SBA Program. Each one has requirements and restrictions in the kind of acquisition or equity buyout structures for the loan to qualify.
While sellers and buyers have a lot of flexibility in how a deal is structured, if financing is needed, the flexibility can’t expand beyond the allowable limits of the specific loan program and lender.
AdvisorLoans works with sellers and their sell-side consultants to match which loan programs or lenders will be needed to match the structure sellers tell us they are looking for.
Matching your desired structure with the right Loan Program
The deal structure sellers develop have a direct impact on the lending options the buyer would need to select and qualify for.
Seller may be looking to stay on after the sell for longer than 12 months, would like to sell equity in tranches to their junior partner over time, maintain some ongoing level of equity, have seller note and claw backs preferences, or would like to sell and receive a down payment and an have earn out structure over years.
In all these cases, Conventional, Tri-Party and SBA a have different rules. If a specific loan program doesn’t allow for the structure sellers are looking for then they should dictate that their potential buyer’s qualify for the loan program does allow for the deal structure.
Potential Buyers need to qualify for the right Loan Program
The SBA program doesn’t allow for:
- Partial equity buy-outs and buy-ins
- Earn out structures for years
- Seller to stay on for more than 12 months after the sale
The Conventional program allows for all of the above.
Conventional and SBA have different qualifying criteria. If your buyer can only qualify for an SBA loan but can’t qualify for a Conventional loan, then this should be screened at the beginning of the process instead of at the end.
AdvisorLoans can help the seller and buyer determine early in the process the likelihood of qualifying for both the loan programs available and the various lenders specific requirements.
Financial Screening & Buyer Pre-Qualification
Avoiding Pretend Buyers
Based upon the desired M&A deal structure and terms, there may be one or more programs that will be available. There are enough buyers in the market for sellers to go too far down the path with a buyers who can’t qualify for the loan program needed.
While there are a lot of buyers out there looking, the vast majority haven’t taken the time to prequalify for external financing. Most first-time buyers don’t know if they can qualify for a conventional loan, a SBA loan, or a loan at all.
Just because a “larger producer” is looking at your practice, it doesn’t mean they would automatically qualify for a loan, or have the necessary cash on hand. Some advisors in growth mode have extra downward pressures on their cash flow, or are now leveraged from previous acquisitions, to the point they don’t have the needed debt service coverage ratio required to qualify for a conventional loan, or even a SBA loan at the present time.
If you’re considering selling your practice, evaluating only buyers who are both able to afford your acquisition and can qualify for the loan program and lender needed, is a good protection of your time. AdvisorLoans provides pre-qualification of the buyer’s ability to do both.
Pre-Qualifying Buyers
AdvisorLoans makes the process a whole lot easier for sellers and their sell-side consultants by pre-qualifying potential buyers against the underwriting criteria of the lending program needed.
We sign an NDA with the seller and the seller uploads their financials into our secure portal. Then sellers or sell-side consultants direct the potential buyer to AdvisorLoans for pre-qualification.
This prevents the seller from disclosing their financials to every interested buyer before knowing if the buyer’s financials are strong enough to qualify first.
AdvisorLoans analyzes the combined cash flow, add backs, buyer credit strength, identifies red flags, and evaluates the likelihood of the buyer qualifying and successfully getting underwritten for either Conventional, Tri-Party, or SBA programs, and then specifically for the lenders within these programs.
When a buyer passes the AdvisorLoans screening, then the seller can provide their financials to the prospective buyer. AdvisorLoans will then be poised to navigate the loan process with the lender when the buyer and seller come to a final agreement.
Providing Industry M&A Lending Support
AdvisorLoans services are totally free. So how do we make money?
When a loan is closed, the lender either reimburses us for loan packaging costs and analysis, or will pay us an allocation from their business development or marketing budgets. There are no extra loan costs associated with using AdvisorLoans than dealing with lenders direct. Our consulting, advice and expert recommendations are reserved for clients who utilize us for loan packing the lending process navigation.
Support to Sell-Side and Buy-Side Consultants
AdvisorLoans supports Sell-Side and Buy-Side Consultants with helping you help your clients get the deal closed through financing foresight, planning, and efficient lending process navigation.
We exclusively focus on the lending aspects of Sell-Side and Buy-Side deal construction and financing. To avoid any conflicts wit our Loan Advisor model, we do not charge buyers, sellers, or consulting firms for our services and we also do not pay a kickback or commission for referrals. AdvisorLoans as an open architecture of lenders and programs available and isn’t a Loan Officer (Sales Person) just representing a single proprietary bank. We know how to get creative, and when workarounds and exceptions can be applied.
Support to Enterprise M&A team and field leadership
Call AdvisorLoans to assist your retiring advisors with prequalifying your internal advisors who are seeking to grow through acquisitions.
We’ll help your selling and succession advisors determine which lending program options allow for their desired succession and retirement strategies and help your advisors get qualified for those specific programs and lenders. AdvisorLoans assists broker dealers, custodians, and firms with smooth and efficient financing of the transitioning of assets from the retiring advisors to your growth advisors.
AdvisorLoans is not a law, tax, or accounting firm. AdvisorLoans does not provide legal or tax advice. Legal or tax issues should be reviewed by legal or tax professionals to ensure the correct application of law and regulation to the specific facts of the situation and transaction.