Why October is a Great Time to Buy or Sell a Business: Especially in 2020
According to the BizBuySell Insight Report, the 3rd quarter is a historically strong period for business for sale listings as many sellers prefer to close before the last day of the year.
For business buyers, finding a business in October allows enough time to agree on a sale price with enough time for the SBA lending process to complete before the year ends.
For business brokers, October is a good month to work with potential sellers and buyers as the kids are back in school (or at least in video conferences in the next room) and summer vacations are over.
October 2020 may prove to be an even stronger quarter for business sales as some sense of normality has returned after the initial COVID-19 shock. Here's why:
- The authors of the original Small Business Debt Relief Act, which was a part of the CARES Act, have introduced the Small Business Debt Relief Extension Act that would extend the period in which every small business with a loan backed by the Small Business Administration, or SBA, was relieved from loan payments—including principal, interest, and fees. The legislation has been positively received by both Republicans and Democrats and also includes provisions for loan payment forgiveness on new SBA loans.
- Some guidance is now in place for lenders to deal with PPP loans and more guidance is expected very soon for PPP loans under $150,000.
- Sellers have indicated to YourSBA over the years that they would much prefer closing the sale at the end of their accounting year rather than having to open up a new set of books and then file taxes for the new year more than a year down the road.
- SBA business acquisition loan interest rates are the lowest since 2001 - and stable at a maximum of 6% until at least 2023 according to the Fed Chair.
- One half of the businesses being purchased with financing secured through the BizBuySell Finance Center are performing at least as well or better than pre-COVID-19 levels.
- For businesses negatively impacted by COVID-19, business owners, buyers and lenders know the initial impact of COVID-19 on the business and better understand how certain businesses can adapt and recover during the pandemic. From a lending perspective, the more months of performance we can review during 2020, the better the chance of obtaining a reasonable business value.
One more reason to consider buying or selling a business in October? It might get you out of raking leaves.