» SBA to Ease Limits on Loans for Buyouts
The Small Business Administration, after enduring a backlash from lenders and business appraisers, plans Oct. 1 to modify a restriction it had placed on loans used to finance acquisitions of small companies.
In March, the SBA, capped the guarantee it was willing to extend on “goodwill” financing, which is the amount of a loan used to purchase an existing business’s intangible assets, such as an established name, brand or customer base. The market price of a small business is based partly on its tangible assets, such as property, equipment and inventory, but often primarily on its goodwill. For some firms for sale, such as professional practices, Internet companies and service firms, the value of intangible assets can range between 55% and 95%.
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