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DUBLIN, CA, October 16, 2013 /24-7PressRelease/ -- The Federal Government shutdown has had an "immediate, personal and devastating effect on thousands of Californians who depended on SBA loan programs to help finance the purchase of a small business," according to Peter Siegel, MBA, Founder and President of BizBen.com California's online network and marketplace for small business transfers.
"People who were expecting an SBA-backed loan for help purchasing a franchised operation, food service, retail company or other kind of small business suddenly are finding they can't continue with their deals. Most of the accepted offers that include a loan contingency are probably history."
Siegel said the consequence of the shutdown on the market "also affects sellers. There are hundreds of thousands of small business owners who are part of the baby boomer generation and ready to retire. How are they going to do that if the money needed to fund their sales is not available?"
Siegel said SBA-backed loans from banks and other financial institutions are "a critical component of at least a third of the business sales in the state at any one time. Most buyers are required to put up a down payment and many deals include some seller financing. But without a 7(a) program or other SBA loan product to rely on, banks and other financial institutions simply withdraw from the small business sales market. Any deals in progress can't be completed unless the parties renegotiate the financing terms."
Siegel said alternative means of raising money to complete a deal include conversion of buyers' 401K programs or getting a "hard money" loan from a private source. But not everyone is in position to access these resources. And if they don't know how to do it right they wind up getting a huge tax bill."
The BizBen.com chief said, "I've talked to a lot of people who need to buy a business they can operate as a career move. That's the right choice for many men and women who haven't been able to get the income or the security they need in this ailing job market. As long as the government shutdown continues, they're back to square one."
Siegel also noted that "once the SBA is back in business and can start guaranteeing loans again, there will be a huge backlog of applications in line for review. That means most buyers will wait months, rather than a few weeks, to get their deals funded."
He said the transfer of small businesses is "an important part of the state's economic health. When new owners take over, the businesses often benefit. The result can be increased revenues, more profitability and, in many cases, expanded job creation."
He also said, the shutdown "occurs at a difficult time for business buyers and sellers. We are just coming out of a severe drop in the market place that resulted from the 2008 banking crisis and he following recession."
BizBen.com, founded in 1994, has facilitated thousands of buyer/seller connections resulting in small and mid-sized business sales throughout California. It lists 8,000+ small businesses for sale at any one time. The site features blogs, articles, resources, and introduces buyers and sellers to business brokers and agents, attorneys, accountants, due diligence experts, business purchase loan specialists and other professionals who provide needed help in buying and selling California small businesses.
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