Here’s What Selling in 2021 Looks Like

If you are a business owner who is thinking of selling your business now that the new year is here, then there are a few things that you should know about selling your business now.

 

Increasing Inventory

In 2020, we definitely saw a large decline in the number of businesses listed for sale. Business owners were waiting to put their business on the market until the COVID uncertainty had passed. Now that we are coming to grips with the fact that COVID is here to stay with us for a while and we must adapt to life in a post-pandemic world, business owners are finding themselves ready to move to the next step of listing their business for sale. As January is in full swing, we have seen a big increase in the number of business listings hitting the marketplace, and that trend is expected to continue into 2021. This increase in inventory will lessen the severe “sellers market” that we’ve been in over the past year, and buyers will have more choices as they look for a business to purchase in 2021. 

 

Buyers in the Marketplace

Our monthly buyer leads and inquires on our listings shot up by 40% in 2020 and the high numbers that we were seeing last year are continuing to come in. There are a record number of buyers out there with lots of people reevaluating their lives, where they live, and what they do for income. We are seeing a boom of people relocating to Florida from up north and even out west. Our real estate market in Florida has gone through the roof and with so many people flocking to Florida, the business sales market is strong too. With the number of serious buyers looking for quality businesses to purchase, there has really never been a better time to sell a business. For years small business sales in Florida have been more of a buyer’s marketplace, and we have finally seen a shift towards a seller’s market in 2020. Trends are showing that as more businesses list in 2021, we are sliding towards a more balanced market, which is the best-case scenario for both sides, as sales tend to be more of a win-win outcome for all parties. 

 

PPP Loans & Selling

With the newest phase of PPP loans rolling out soon, it’s important for business owners to know how PPP loans will affect the sale of their business. So, if you are going to be selling in 2021, this section will be important. Ideally, the business owner should apply for forgiveness as soon as they are able to do so with their bank. Getting it off the books and taken care of with the SBA and the bank is the best-case scenario for preparing to sell. In the situation where there is an existing PPP loan that has not yet been forgiven, the SBA will not grant the buyer an acquisition loan without the funds matching the loan amount held back in escrow after the sale. So, this is something to keep in mind if you plan to sell in the near future. You will have to put those funds aside in order to sell to a buyer who is getting an SBA loan, even if you plan to seek forgiveness. This is something that the SBA is requiring. Make sure to let your business broker and the closing attorney know if you’ve got a PPP loan, so they are aware and can make the appropriate arrangements. 

 

SBA Loans

The SBA is encouraging business acquisition loans once again and offering buyers incentives to borrow and offering amazing guarantees to banks to encourage lending. There has never been a better time to buy using an SBA loan. Buyers who close on a loan before the end of September 2021 will receive 6 months of their principal and interest paid for by the SBA, and for the first time ever, the SBA is waiving the 3% guarantee fee for buyers. If you are buying a $1,000,000 business, that is a $30,000 savings. Banks are also going to be lending on more businesses, as the SBA has increased their guarantee from 75% to 90%, which reduces the risk of the lenders. 2021 is going to be a great year for buyers, because payments are free and fees are reduced, so things are looking good for business acquisition loans in 2021. 

 

Possible Tax Changes

As we all know, a political party shift is coming to the White House in 2021, and that could possibly mean changes to the federal tax brackets, changes to capital gains taxes or changes to taxation on the sale of businesses. Of course, at this point, no-one knows what tax changes could be imposed, but we do know that those changes wouldn’t take effect until 2022. So as far as 2021 goes, if you sell this year, the tax implications should be the same as the past 3 years. For many business owners, this is an attractive reason to list and sell in 2021, before any potential changes to taxation take place. Of course, we are not tax experts, so for specific questions regarding tax liabilities when selling or buying a business, please check with your personal CPA or accountant. 

 

If you want to talk to one of our expert business brokers about selling your business in 2021, we are happy to set up a confidential consultation to see how we can help. Give us a call or send us an email today and we will gladly set up an appointment for you.