June 11, 2025 • 33 mins
Beau Eckstein: Franchise & SBA Loan Expert, Business Ownership Coach, and Investor. With over 26 years of experience in lending, franchising, and business acquisition, Beau Eckstein is a trusted authority in business ownership. He has helped thousands of entrepreneurs secure funding, navigate SBA loans, and find the right franchise or business to own. Through his extensive network and expertise, Beau guides clients through the financing process and connects them with the best opportunities.
As the host of The Investor Financing Podcast, Beau has created content that has generated millions in funded deals, helping entrepreneurs transition from employees to successful business owners. He advocates for leveraging virtual assistants and AI to streamline operations and increase profitability, empowering businesses to scale effectively.
In addition to being a licensed California real estate broker, Beau offers actionable insights through his platform, businessownershipcoach.com, where he helps individuals explore franchising or elevate their existing business ventures. Beau’s passion lies in helping people break free from the corporate grind, build wealth, and create lasting legacies.
During the show we discussed:
Who franchising is ideal for
How to secure financing to purchase a franchise
How to buy franchises with 10% or less down payment
How to obtain SBA financing to purchase a franchise
How to use SBA financing to build or acquire a new business
How to qualify for SBA financing
Why SBA loans under $500K don’t require additional collateral
How to use SBA financing to start a new business based on projections
What a seller carry on full standby is and how it helps reduce your cash down
How to use creative financing to meet SBA loan down payment requirements
Resources:
businessownershipcoach.com
beaueckstein.com
Bookwithbeau.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:02):
(Transcribed by TurboScribe.ai. Go Unlimited to remove this message.) Welcome to the Business Credit and Financing Show.
Each week, we talk about the growth strategies
that matter most to entrepreneurs.
Listen in as we discuss the secrets to
getting credit and money to start and grow
your business.
And enjoy as we talk with seasoned business
owners, coaches, and industry leaders on a variety
(00:22):
of topics from advertising and marketing to the
nuts and bolts of running a highly successful
business.
And now, to introduce the host of our
show, financial expert and award-winning author, Ty
Crandall.
Hello, and thanks for joining us today.
I'm super excited you could be here.
Today, we're talking about some really cool topics
that I think can help you expand out
(00:43):
or maybe even get into a whole different
type of business altogether, because we're gonna be
diving into mastering business ownership.
We're gonna be talking about expert strategies for
success in franchising, if you're interested in potentially
getting into a franchise and beyond.
And beyond, I mean things like SBA loans,
because we've got like a foremost expert on
both of those topics with us today.
So, Paul Eckstein is a franchise and SBA
(01:07):
loan expert, business ownership coach, and an investor
as well.
He's got 26 years of experience in lending,
franchising, and acquiring businesses.
Beau is a trusted authority in business ownership.
He's helped thousands of different entrepreneurs secure funding,
navigate SBA loans, and find the right franchise
or business to own.
Now, through his extensive network and expertise, Beau
(01:27):
actually guides through the financing process and connects
them with the best opportunities.
He's also the host of the Investor Financing
Podcast, where he's created content that has generated
millions in funded deals, helping entrepreneurs transition from
employees to successful business owners.
Now, he advocates for leveraging virtual assistants and
AI to streamline operations and increase profitability, empowering
(01:49):
businesses to scale efficiently.
Now, in addition to being a licensed California
real estate broker, Beau also offers actionable insights
through his platform, businessownership.coach.com.
That's businessownershipcoach.com, where he helps individuals explore
franchising or elevate their existing business ventures.
Now, Beau's passion lies in helping people break
(02:11):
free from the corporate grind, build wealth, and
create lasting legacies.
Beau, what's up, man?
Thanks for coming on with us today.
Thank you.
I'm excited to be here.
I've been following you for years, and you're
always, I remember years and years ago, watching
a lot of your content.
And I always said, this guy, you're an
expert in the business funding space, but your
marketing strategies are top-notch.
So, hats off to you, because I've been
(02:32):
following you for a while.
I appreciate that, man.
It means a lot.
Sometimes I forget how long I've been doing
this, and then I have the young bucks
all come on the show, and it's like,
wow, it's pretty cool to see a lot
of these 20-year-olds running into the
scene and the cool things they're doing.
And it's also really cool, I'm sure you'd
agree, I don't know how long you've been
doing this yourself, but just to see the
AI and the revolution of technology that we've
(02:55):
seen over the last decades, it's just really
cool, and its ability to help business owners
get money.
Oh, yeah.
I mean, if you're not using AI, you're
gonna be replaced, right?
Because there's a lot of people that, AI
can 10X, 100X your production, and I use
it every single day.
And it's amazing to me that people haven't
even played around with ChatGPT yet.
It's like, once you understand the power of
(03:15):
what is capable, I have some of the
franchises I work with, they use AI callers,
and they're doing outbound and booking appointments.
And then like, I mean, it's sales agents
and appointment setters.
It's like, it's really crazy times right now.
So like, my suggestion for everybody is just
learn a little bit, go onto YouTube University,
(03:36):
play around on ChatGPT, get familiar with it,
because it's really a game changer.
I'm not a very good writer, but with
AI, it really, I can get my thoughts
out and get articles done in seconds rather
than hours.
Yeah, agreed.
I just had an AI expert I just
interviewed for the show, and it's astonishing on
where we are and where we're going with
AI as well.
Now you're big in franchising.
(03:57):
So what was originally piqued your interest in
franchising?
So I started at 20, I'm 47 now.
So 27 years ago already, started as a
residential mortgage broker.
I actually started as a telemarketer.
I had met a guy at a gym
and he was a loan officer.
He said, oh, you should come in and
you can get licensed, but you could start
as a telemarketer.
So I was crushing it as a telemarketer
back in the day.
I quickly got my license and started originating
(04:19):
residential loans.
That was in the San Francisco Bay Area.
Then I got the bright idea to move
with a partner, move to Lake Tahoe on
the Nevada side, because it's a brick and
mortar state to get licensed there.
So we opened a residential mortgage company in
2005.
And then everybody knows what happened in 2007,
eight, nine.
At that time, I was in my twenties,
owned a bunch of real estate and got
(04:39):
completely wiped out.
Ended up moving back to the Bay Area
at that time.
And I'm like, look, I don't have a
college degree.
The only thing I've ever known is real
estate and lending.
So I got into doing hard money lending.
And this was before all the national fix
and flip and DSCR lenders were there.
And I worked for some funds in the
San Francisco Bay Area.
And I started originating a fix and flip
loans and construction loans for investors.
(05:01):
And then of course that industry got blown
up and institutional money came in, but that
really cut my teeth from there.
I was like, hey, I'm lending money to
these house flippers.
I can do this.
Did some house flipping.
And then I didn't love house flipping, but
back then you could just cherry pick deals
off the MLS and crush it.
So made some decent money, rebuilt my credit.
And then I started running real estate investor
(05:22):
meetups, built a huge network of people, put
on a lot of events in the real
estate space.
And then it was kind of like a
dime a dozen business at some point.
So I'm like, I'm kind of bored of
originating fix and flip loans.
And so I got into commercial lending.
And through that, I discovered SBA lending where
I was like, it's an interesting industry because
it's not one size fits all.
(05:42):
There's lots of banks, lots of credit unions,
lots of non-bank SBA lenders.
Learned that industry.
And through that industry, people would come to
me and say, hey, can you fund this
anti-pretzel franchise?
And I'd always say, well, why this franchise?
Oh, we just like the pretzels.
And they never really had a good answer
why they were investing other than it was
usually like some kind of quick serve restaurant.
So then I somehow discovered that there was
(06:03):
actually franchise brokers and consultants.
So I actually joined a association and got
trained and spent years learning the industry and
actually knowing what I know now, I would
have loved to have started in this business
because it's so dynamic.
So with my background in lending and finance
and franchising, I'm a deadly weapon now.
And then I set out on a mission.
(06:24):
I first started with 10,000 people.
Like I finally got clear after many years
of business.
And I said, look, I've never really had
a mission.
I just like to help people.
So I got crystal clear on a mission.
And I said, I wanna help 10,000
aspiring entrepreneurs become successful business owners over the
next 10 years.
And then I just, I scratched that out
about like three months ago.
I go, 10,000 is really not that
(06:44):
many because I'm not saying I'll directly help
them but through my podcast and guesting on
podcasts like this I can help well over
10,000.
So I scratched it out and made 100
,000.
And then I'm like, you know what?
That's actually thinking too small.
And I set the target to touch a
million people in the next 10 years because
everybody should own a small business.
I believe everybody should own a small business.
(07:05):
I actually have a book that's in presale
right now.
That's about why everybody should own a business
and how to transition from corporate to owning
your business.
And I call it the triangle method.
It's tax strategy, operating business and real estate.
Right?
Like at first I was buying these rental
properties in the Midwest because I thought I
was gonna get all this cashflow.
Do you get cashflow?
Maybe a little bit, but the time you
(07:26):
do the CapEx and the repairs you're not
really cash flowing.
It's more of a long-term play.
Sold all those properties because I was like
that.
It's really a myth that you're gonna get
cashflow on long-term rentals especially if they're
cheap housing stock.
And so that's when the focus really went
into like if you really wanna create cashflow
you gotta own an operating business.
And that's like the love of what I
(07:47):
have right now.
And with SBA financing it's the most aggressive
financing out there if you can qualify.
So I think knowing that and pairing that
with franchising is like a perfect compliment to
really get out there and help people.
And my book it's called Paycheck to Freedom.
And I actually wrote it with a pretty
famous CPA.
His name is Tom Wheelwright.
(08:07):
So he's a rich dad advisor and he's
written a lot of books.
So that was pretty exciting for a first
book to have a co-author with somebody
who's sold hundreds of thousands of copies of
books already.
So excited for that to roll out at
the end of March.
And then I do a lot of virtual
events and summits.
I have one flagship summit that I call
Business Ownership Summit.
We do it quarterly online and we just
(08:28):
do deep dives on learning different franchise business
models, interviewing people that own businesses, bringing on
CPAs to talk about tax strategy and all
that good stuff.
So that's kind of the background of how
it all happened.
And I learn every day, always learning.
And I always listening to other people's podcasts
and there's a ways.
Every day I'm on a phone call or
a Zoom meeting with somebody like yesterday, for
(08:50):
example this stuck out with me.
I don't do a lot of like MCA
or any revenue based financing right now.
But like the guy was a chiropractor and
he's like, he started talking.
He's like, I heard you on a podcast
and I wanna do something.
I'm kind of stuck actually.
His business is doing fairly well but he
racked up some credit card debt.
And I'm like, really what you need to
do is do a revenue based loan because
(09:11):
his scores went down to 618.
A lot of people don't understand.
And you were always an advocate years and
years ago, right?
Like guys, you gotta keep your personal credit
pristine because even though they don't understand the
basic strategies of credit and what credit can
do to you.
And so like I gave him like 10
minutes I gave him a whole new plan
because he was kind of stuck and he's
an older guy.
And he's like, yeah, my business is doing
(09:33):
fairly well but I racked up X amount
of dollars in credit card debt and I
can't pay it down.
So I said, look, the high level you
can do some sort of revenue based loan
or financing with your deposits from your chiropractic
business.
Take that, pay off your personal, not supposed
to do, but pay off the personal credit
card debt.
Now your 618 credit score goes to 740
(09:55):
where you need to be, right?
Then I told him about why you wanna
build business credit because when I go into
a bank now, they're gonna, granted they pull
my credit but I'm pristine on that side.
And so then I gave him a whole
plan and we're gonna do SBA working capital
loan maybe potentially.
And then he, then where he's gonna open
a franchise that aligns with his chiropractic business.
(10:17):
So we're gonna do like a health and
wellness alongside and buy a building using SBA
financing.
So I gave this guy a blueprint but
there's a lot of people out there that
are stuck and that's what I think we
do well.
Yeah, and I love that.
I love the history of kind of where
you come from and what got you interested
in where you are.
So buy, build, franchise.
I oftentimes hear buy or build.
Franchise, they don't make the list in a
(10:38):
lot of cases and I don't know why.
So when do you think it's the right
time for somebody to consider buying a franchise?
So, I mean, a franchise is really a,
you're buying into a system and a marketing
strategy and it's a business in a box.
I hate to say that, but it's true.
Like there's well over 3,000 franchises and
most of the franchises we put our candidates
(10:58):
into are non brick and mortar.
They're usually in the home service, recession resilient
businesses.
Just to give you an example, I had
a gentleman come to me and he's like,
look, he does gutter sales for new gutters
and he did fairly well.
He made about a hundred grand a year,
but he's like, look, I'm not building anything.
I'm like the time you pay taxes.
He really wanted to own a painting company.
So we found him a painting franchise startup,
(11:19):
built in the franchise fee, working capital, all
that good stuff.
And the nice thing is, is when you
have small ticket franchises, meaning the total project
costs around 150 grand, there's banks out there
that will fund 90% even on a
startup.
So they're basing it on projections.
As long as it's an approved franchise.
Well, this guy got into business with 12
grand out of pocket essentially.
So we can help everybody and that's the
(11:41):
beauty of it.
And then going along with what you do,
I think there's such a need to educate
business owners on entity setup and building credit
lines on like how to really leverage because
most of us don't have several hundred thousand
sitting around in a bank.
We need to like leverage into financial freedom.
And I think if you do it in
the correct way, you'll win versus you do
(12:03):
it in the bad way.
So I see so many people, I get
this call when I get to the part,
how's your personal credit?
Well, it was good, but I started charging
up a lot of credit card debt and
I'm like, is that personal credit?
Yeah.
Okay, step one, don't do that because you
gotta keep your personal credit pristine.
And so like, it's so funny that so
many people don't even understand the basics of
(12:25):
credit where it's, I think everybody needs that
course first so they can leverage into these
businesses correctly because there is good debt and
there's bad debt.
So I see a lot of franchises that
are out there and they're pretty expensive to
get into.
Like I'm not drawing off the dollars, I
know nothing about them.
But that being said, I see it where
they've got, they're saying you need to be
(12:46):
prepared ultimately sometimes for hundreds of thousands or
even millions of dollars that you're going to
have to have for build out, for location,
for all these other things.
So do you think there's a lot of
different ways to get these franchises financed where
you don't have to come out of pocket
with all that money?
Yeah, I mean, SBA financing for one.
Generally, most banks are at 80% of
(13:07):
total startup costs, including working capital.
They'll fund 80% of total project costs.
For small ticket franchises, we have one or
two banks that are specialized on loans amounts
up to 150 and they'll do 90%.
They're the easiest bank to work with too.
So generally what we do is we give
people in a business assessment, it's kind of
(13:27):
like a disk profile on steroids with different
facets.
That helps us actually scientifically match what business
models might be a good fit.
Then we meet like we're meeting right now
over Zoom and I do a lot of
intake asking questions, getting to know them better.
From there, I kind of create a thesis
of what business models might be good.
Then I do territory checks.
(13:48):
If it's available in the market, I come
back to them and show them seven or
10 different business models.
I want them to look at two or
three and deep dive and learn about those
two or three.
It's kind of our general process.
And then there's multiple steps to learn the
business, to call other franchise owners.
We're essentially like really qualified buyers agent in
real estate.
That's kind of what we do.
And we don't actually charge them a fee.
We get paid from the franchise or a
(14:09):
referral fee.
So when you do that and you're helping
somebody set up a franchise initially, do you
deal with people coming to you and just
say, I want to launch a franchise or
people coming to you and say, I want
to launch a franchise in this industry or
are they very specific?
There are people come to you and say,
I need help financing and I want to
buy like Jimmy John's franchise and they know
exactly what they want to buy or is
(14:31):
it just like some of all of them?
It's everything.
So I talk a lot about SBA financing
or I have CPAs that refer me deals
like, okay, this guy's buying is in talks
to try to buy XYZ painting franchise total
costs are 200 grand.
Then I meet with them.
I do like a, I have an intake
form.
And okay, yeah, this like, because years ago
they had the SBA directory, which had approved
(14:52):
franchises on.
Didn't mean they're approved, meaning they're good franchise
means there was approved SBA on SBA list.
So banks used to say, okay, it's an
approved list.
We can do the funding.
Now each bank has a little different buy
boxes.
You know, every lender is completely different.
You could take the same deal to five
different banks, four say no, one say it's
yes.
And so in the franchise space, there's a
handful of big players that are the best
(15:13):
at franchise startup financing.
So I'll take people that, and just help
them on the financing side, or I help
people find and fund their business depends on
where they come.
So like, really, I call myself a business
ownership coach, which is like, look, any way
you need, I have people coming to me
for RV park financing.
I have people buying hospitalities that are Airbnb
operators, people doing franchising.
Like I just really want to help people
(15:35):
get to where they want to go and
to get where they want to go is
owning a business.
It's not working for somebody else.
Now working, there needs to be employees.
So I'm not saying like, it's just a
numbers game, but if you have the desire,
I think everybody should own a business.
So like, if you're an employee and you're
crushing it, maybe we get you into a
semi-absentee franchise model where it's like a
(15:55):
simple, more simple established business to run, but
because they're keeping their high tech job, making
400 grand a year, and they buy some
other type of business where they could be
semi-involved.
Some of them need to be owner operator
where you're in the business.
So when we do all this assessment, that's
how we match.
And that's like part of the dynamic.
It's not like owning a piece of real
estate.
It's moving parts as you're a business owner.
(16:17):
There's a lot to do.
So I also help people get into what
I call gateway businesses like vending machines.
So we work with a couple, they're not
franchises, they're business opportunities, and they sell packages
of machines.
They actually train you, you go to two
days of training, you get a business coach,
and they actually, some of these companies actually
will place the machines for you.
So on something like that, the beauty of
that is, is like if they buy 100
(16:39):
grand of machines, I can finance 90,000
of it with the bank.
So like you can get into this business,
you spend about one hour per week per
machine.
So there's a business for everybody, and it's
just about pairing them with the right business.
A lot of people got into short-term
rentals, and now they're like, hey, there's too
many regulations.
They wanna start buying inns and boutique motels,
(17:00):
all SBA eligible.
So there's really SBA, we're blessed as US
citizens to have such a cool program, because
most countries don't have any financing like this.
Now, not everybody can qualify, because like sometimes
they're in a bind and they make good
deposits.
That's why there's all this alternative financing, which
you are the master at, like MCA, revenue
-based, asset-based lending.
(17:21):
And now a quick break to hear from
our sponsor.
Hey, it's Ty Crandall with Credit Suite.
Many of our subscribers wanna get the most
money to grow their business at the best
terms.
Whether you're looking for startup capital, low-interest
credit lines and loans, or business credit, we
can definitely help you.
So give us a call at 877-600
-2487, or schedule your free consultation at creditsuite
(17:42):
.com forward slash consult to see how much
money you can get approved for today.
And understanding how all this financing works and
then putting it together, because sometimes you can
do an SBA loan and pair it with
equipment financing and keep under $500,000.
Because if you keep a loan, an SBA
loan under 500,000, they don't have to
look for additional collateral.
So there's all these things, the way we
(18:04):
work and we put together, they make a
lot of sense for people.
So what's really exciting though, is after you're
in business for two years, you can get
up to 100% financing on an SBA
expansion, which is amazing.
Or you own a, let's just say you
own an HVAC company, you've been running it
for a few years, you're doing good.
The competitor down the street is retiring, you
can go buy that business with 100%
(18:24):
SBA financing, assuming that everything falls in line.
So super aggressive financing out there, it's a
10 year term based on Wall Street Journal
Prime plus a margin.
If there's real estate involved and real estate's
a bigger component of the purchase, you can
amortize over 25 years.
So you can be creative.
And then you can do SBA five or
four deals.
You can do $20 million deals because it's
the first and the second.
(18:45):
So lots of ways to do it.
And then if it's in a rural area,
for example, let's say you're buying a assisted
living facility in a smaller town.
If it's under 50,000 population, we use
a map, you can actually do USDA BNI
financing up to $25 million.
So there's all these amazing programs that are
fingertips.
Most people don't know about them.
There's also state guarantee programs in certain states,
(19:06):
which are lookalike SBA programs, which can fit
a certain need.
So I just try to study and learn,
and I'm always going to conferences and listening
to webinars and learning about alternative financing.
Because for me, I just need to figure
out solutions for people.
And like how, is it me referring somebody
to somebody and building relationships with banks?
(19:26):
That's what I do.
And then on the franchise side, it's understanding
what the franchise is doing, figuring out what
franchise model makes best sense for somebody.
We also do resale.
So franchise resales too, as well.
Somebody who's retiring wants to sell their franchise.
We have inventory there.
So, Beau, you just mentioned a bunch of
off-the-cuff SBA programs.
(19:46):
And a lot of people don't know these.
A lot of people are familiar with the
7A loan, where you can get money for
working capital.
A lot of people are familiar with the
504 loan for fixed assets, such as real
estate.
So give me an idea here, because a
lot of people don't know that you can
use SBA to be able to get a
franchise.
A lot of people don't know that you
can use SBA to acquire a business.
A lot of people don't know you can
use SBA to start a business.
(20:08):
I mean, people are shocked that there's even
such a thing as SBA startup loans.
So give me an idea.
What are the different types of SBA loans
that are really out there and the purposes
that they really fill?
Like, you can use this to acquire.
You can use this to be able to
get working capital.
Give me a rundown of the SBA programs
that most people just are not familiar with.
Okay, so I'll just give you just a
(20:28):
case study.
Several months ago, a gentleman heard me on
a podcast.
It was a laundromat podcast.
And he said, look, I can't find one
to buy.
I want to start one.
And so he had figured out he was
leasing a property.
He found the spot.
He had the equipment invoices and the construction
bid.
It was a million two total project costs.
The guy had no laundromat experience.
(20:49):
The guy didn't own any additional real estate.
He had about 300,000 liquid.
That was about all we had going for
us in good credit.
And he had a job, outside income that
supports outside debts, good credit.
So I went to three or four banks,
got turned down.
Hey, it's a risky venture doing a startup
laundromat because the banks pull reports and so
(21:09):
forth.
But there's always a bank that understands an
industry.
So on the fourth bank, I took it
to.
Sure enough, they approved it.
They did 85% of total startup costs.
We did whatever that is, 1,000,022
on a construction build-out loan where they
didn't have any real estate and there was
a huge collateral shortfall.
So startups are financeable.
(21:30):
You gotta get a business plan.
You gotta find the right bank or lender
on that.
Of course, any owner-operated type of real
estate business with real estate is eligible.
So you're a CPA and you've been leasing
property for five years and you're like, I
need to own a building.
As long as you occupy 51% of
that space, you can get up to 100
% financing on the 7A.
(21:51):
So we call that a rent replacement deal.
Now you're capped at 5 million of total
aggregate SBA financing.
Although we have a new administrator that just
got appointed, Kelly Loeffler, I believe is her
name.
So the $5 million aggregate has been in
place since 2010.
I believe, and so do other people in
the industry, that that's gonna move up.
And I believe, my gut is saying 10,
(22:13):
but at least seven and a half million.
There's a lot of business acquisitions of business
acquisition as well, working capital as well, construction
deals.
So you're building office building for yourself.
They're rolling out a new pilot program for
working capital right now.
Partial buyouts, you can like, I've been working
for a company.
The guy wants to retire.
I'm gonna buy 81% of the business.
He's gonna stay on at 19%.
(22:34):
I guarantee the loan, he doesn't need to.
He gets some of his money.
So you weren't able to do a lot
of that years ago and they constantly update
the SOP.
So there's like a lot of cool things
you could do.
Right now I'm working on a deal that
the guy's buying an old RV park and
it's not been running, operating.
It's like pretty much, guy forgot about it
and owns it and doesn't care.
(22:55):
So the guy that's buying it is going
on and he's gonna put 13 tiny homes
on it and get rid of the two
or three people that are living on the
space right now.
And so it's like a $2.4 million
deal that's eligible.
And we can base it on projections.
So you can do projection based financing.
Obviously, if there's real estate involved, more banks
wanna do real estate.
Like some of the banks I work with
wanna do, they only will do SBA with
(23:17):
commercial real estate involved.
Some of the banks will do airball deals.
An airball deal means I'm doing a business
acquisition of an e-com business.
There's really no collateral.
And I might not even have any real
estate for them to collateralize.
That's okay.
As long as you get a bank on
board and you're buying a cash flowing business.
So basically I always tell people the same
thing.
Do you have good credit?
(23:37):
Yes.
Do you have a decent resume?
Yes.
Do you have outside income that supports outside
debts?
Yes.
Okay, good.
We're there.
Is the business in proximity of where you
reside right now?
Yes, that helps.
It doesn't, that's not a...
Okay, now we know you're probably gonna be
good there.
Do you have 10% of the total
project costs liquid or can you make that
available?
Yes.
Do you have a little bit of reserves?
(23:57):
Yes.
Cool.
You sound promising.
And so, but the real, when you're doing
a business acquisition, the real thing is getting
the tax returns from the business you're buying.
That's how we underwrite off SBA.
So we need, right now we need 2021,
22, 23.
You're in profit loss on 24 and a
balance sheet.
Once I get that, we spread it.
And I'm not a numbers person, believe it
or not.
I hate numbers, but I understand concepts.
(24:19):
So we spread the financials and we're looking
for on a business acquisition, you have to
have a debt service coverage ratio of 1
.15. Basically that's pretty low.
It means the business can support the new
debt payment.
There's a little bit left over.
So obviously that makes sense.
They don't wanna do a deal where they're
not cash flowing.
Sure.
So there's a lot of use cases, yeah.
So we can use SBA loans for just
(24:39):
general working capital for our existing business.
We can use it to purchase real estate.
We can use it to buy a franchise.
We can use it to acquire a new
business.
We can use it to launch a new
business or we can use it to acquire
a business.
We can use it to launch a new
business.
And depending on risk factors, we can get
anywhere between 80, 90% of the financing
(25:02):
we need.
What about the other 10%?
Do we have to have the 10%?
Does it have to come from us and
our cash?
Or as you know, I deal with a
lot of alternative financing options.
Can I get it through alternative financing?
Can I go in and look to buy
a business and get 90% from SBA
and then come in and get the other
10% using their account receivables and borrowing
(25:24):
against the existing company's account receivables?
Just a wild scenario.
Like, is there other ways we can get
the 10% down other than our money?
Or they want us to have the skin
in the deal.
Meaning, can we use the 10% to
be able to get it from somebody else?
Or can we use it from our own
personal assets?
Or can we use it from the assets,
for example, the business we'll buy?
Yeah, so you can get extremely creative.
(25:45):
So one thing is there's something called seller
carry on full standby.
So most banks want to see at least
5% equity injection from the buying party.
But some banks are as good as little
as 2.5% down.
So let me give you an example.
Million dollar acquisition of a business.
900,000 is financed by the bank.
100,000 needs to come in as some
(26:05):
sort of equity injection.
The seller can actually leave some of their
equity, it's called on full standby, for up
to 7.5%. So now that's 75,000.
So you got $900,000 first, seller carry
second at 75,000.
Now we got to come in with 25
grand, right?
To close a million dollar business that's cash
flowing and could replace your salary.
So that's pretty exciting.
(26:26):
If you can find the right business and
you can, okay.
Well, what if you're a little bit low
liquidity?
Now the deal's got to make sense.
Like you got to be able to, even
that you can do, it doesn't mean a
bank's going to do it.
But essentially I'll give you an example of
a deal that I'm involved in.
The guy came to me, actually my wife
is the investor in it because I helped
(26:47):
arrange the financing.
My wife, a friend referred this other gentleman
who's in a mastermind and he had found
a marina with a restaurant with 110 boat
slips.
And he's like, hey Bo, I found this
great business, it's great returns.
At least it looks that way.
The only problem is I just bought a
short-term rental.
I used all my money.
I go, okay.
He's like, can you help me find some
(27:07):
investors?
So the way we structured is we got
90% financing.
It was a $2 million acquisition, 90%
financing from the bank.
We had his brother come in with like
30 or 40 grand and then he needed
another a hundred.
So my wife came in with 50 and
my other friend came in with 50.
So my wife now owns 19% and
my other friend owns 19% and their
(27:28):
brother owns 13%.
And then anybody that owns greater than 20
% has to be a guarantor.
So the main borrower is the guarantor, right?
So- I just, I'm laughing because I
love it.
Only people that know that are going at
19%.
I'm the same way.
Every business I've owned or should be interested
it's all at 19%.
So I just had to laugh for a
second because only we would do that or
(27:50):
know that.
But anyways, I'm sorry, I didn't mean to
interrupt you.
Just made me laugh.
No, that's good.
So the point is, is you can bring
outside investors.
It's better when it should, technically it's not
supposed to be a loan, but yeah, so
you can get creative.
And so you can give ownership under 20
% of the business for the down payment,
or we call it an equity injection.
So on this million dollar example, I said
previously, you only got to come in with
25,000 because we're getting the seller to
(28:11):
carry back 7.5% on standby.
It's got to be on standby for at
least two years.
And that rule change, it used to be
the life of the loan.
Now the business has to cashflow that you're
buying.
And sometimes we have to structure the note
a little bit differently depending on the cashflow
requirements.
But you can have like two notes.
So sometimes you do a seller standby note
and then you have another note.
So there's ways of making the deal work.
(28:33):
So that's why when you're doing a business
acquisition, the first thing I always say is
get the tax returns because everybody tries to
send you P&Ls.
SBA is very strict.
They're going to underwrite based on the tax
returns of the selling business.
So we need to get those.
Then we come up with a plan.
Then you create an LOI, the buyer drafts
up an LOI so they don't get into
(28:54):
a business and have to retrade with the
seller because the seller is like, hey, you
wrote an LOI at a million.
Now you're telling me you can only do
eight.
We get the finances up front.
We can write a solid LOI and get
you ahead of the game.
Now, other creative financing options are, we already
talked about bringing an investor partner in.
You can actually get gifted the equity injection.
So it could come from a family member
as a gift.
(29:14):
A lot of times you could put HELOCs
on properties.
Maybe you have other businesses where you can
do revenue loan.
And then that business entity lends to this
entity or that entity becomes a partner in
the deal.
Potentially you could do some borrow against accounts
receivable on the business you're buying, like you're
talking about.
There's ways of structuring that.
That's not my expertise, but I'm sure you
guys have seen deals like that.
(29:36):
Yeah, there's really a lot of ways of
doing it.
And now there's actually companies that actually will
become an equity partner with you.
So after I, that's kind of like my
progression in the future is to start a
company that does that, that becomes the equity
partner that owns less than the 19%
and does it on cert, obviously you have
(29:56):
to cherry pick the deals, but I have
bankers tell me all day.
(Transcribed by TurboScribe.ai. Go Unlimited to remove this message.) Welcome to the Business Credit and Financing Show.
Each week, we talk about the growth strategies
that matter most to entrepreneurs.
Listen in as we discuss the secrets to
getting credit and money to start and grow
your business.
And enjoy as we talk with seasoned business
owners, coaches, and industry leaders on a variety
(00:22):
of topics from advertising and marketing to the
nuts and bolts of running a highly successful
business.
And now, to introduce the host of our
show, financial expert and award-winning author, Ty
Crandall.
Hello, and thanks for joining us today.
I'm super excited you could be here.
Today, we're talking about some really cool topics
that I think can help you expand out
(00:43):
or maybe even get into a whole different
type of business altogether, because we're gonna be
diving into mastering business ownership.
We're gonna be talking about expert strategies for
success in franchising, if you're interested in potentially
getting into a franchise and beyond.
And beyond, I mean things like SBA loans,
because we've got like a foremost expert on
both of those topics with us today.
So, Paul Eckstein is a franchise and SBA
(01:07):
loan expert, business ownership coach, and an investor
as well.
He's got 26 years of experience in lending,
franchising, and acquiring businesses.
Beau is a trusted authority in business ownership.
He's helped thousands of different entrepreneurs secure funding,
navigate SBA loans, and find the right franchise
or business to own.
Now, through his extensive network and expertise, Beau
(01:27):
actually guides through the financing process and connects
them with the best opportunities.
He's also the host of the Investor Financing
Podcast, where he's created content that has generated
millions in funded deals, helping entrepreneurs transition from
employees to successful business owners.
Now, he advocates for leveraging virtual assistants and
AI to streamline operations and increase profitability, empowering
(01:49):
businesses to scale efficiently.
Now, in addition to being a licensed California
real estate broker, Beau also offers actionable insights
through his platform, businessownership.coach.com.
That's businessownershipcoach.com, where he helps individuals explore
franchising or elevate their existing business ventures.
Now, Beau's passion lies in helping people break
(02:11):
free from the corporate grind, build wealth, and
create lasting legacies.
Beau, what's up, man?
Thanks for coming on with us today.
Thank you.
I'm excited to be here.
I've been following you for years, and you're
always, I remember years and years ago, watching
a lot of your content.
And I always said, this guy, you're an
expert in the business funding space, but your
marketing strategies are top-notch.
So, hats off to you, because I've been
(02:32):
following you for a while.
I appreciate that, man.
It means a lot.
Sometimes I forget how long I've been doing
this, and then I have the young bucks
all come on the show, and it's like,
wow, it's pretty cool to see a lot
of these 20-year-olds running into the
scene and the cool things they're doing.
And it's also really cool, I'm sure you'd
agree, I don't know how long you've been
doing this yourself, but just to see the
AI and the revolution of technology that we've
(02:55):
seen over the last decades, it's just really
cool, and its ability to help business owners
get money.
Oh, yeah.
I mean, if you're not using AI, you're
gonna be replaced, right?
Because there's a lot of people that, AI
can 10X, 100X your production, and I use
it every single day.
And it's amazing to me that people haven't
even played around with ChatGPT yet.
It's like, once you understand the power of
(03:15):
what is capable, I have some of the
franchises I work with, they use AI callers,
and they're doing outbound and booking appointments.
And then like, I mean, it's sales agents
and appointment setters.
It's like, it's really crazy times right now.
So like, my suggestion for everybody is just
learn a little bit, go onto YouTube University,
(03:36):
play around on ChatGPT, get familiar with it,
because it's really a game changer.
I'm not a very good writer, but with
AI, it really, I can get my thoughts
out and get articles done in seconds rather
than hours.
Yeah, agreed.
I just had an AI expert I just
interviewed for the show, and it's astonishing on
where we are and where we're going with
AI as well.
Now you're big in franchising.
(03:57):
So what was originally piqued your interest in
franchising?
So I started at 20, I'm 47 now.
So 27 years ago already, started as a
residential mortgage broker.
I actually started as a telemarketer.
I had met a guy at a gym
and he was a loan officer.
He said, oh, you should come in and
you can get licensed, but you could start
as a telemarketer.
So I was crushing it as a telemarketer
back in the day.
I quickly got my license and started originating
(04:19):
residential loans.
That was in the San Francisco Bay Area.
Then I got the bright idea to move
with a partner, move to Lake Tahoe on
the Nevada side, because it's a brick and
mortar state to get licensed there.
So we opened a residential mortgage company in
2005.
And then everybody knows what happened in 2007,
eight, nine.
At that time, I was in my twenties,
owned a bunch of real estate and got
(04:39):
completely wiped out.
Ended up moving back to the Bay Area
at that time.
And I'm like, look, I don't have a
college degree.
The only thing I've ever known is real
estate and lending.
So I got into doing hard money lending.
And this was before all the national fix
and flip and DSCR lenders were there.
And I worked for some funds in the
San Francisco Bay Area.
And I started originating a fix and flip
loans and construction loans for investors.
(05:01):
And then of course that industry got blown
up and institutional money came in, but that
really cut my teeth from there.
I was like, hey, I'm lending money to
these house flippers.
I can do this.
Did some house flipping.
And then I didn't love house flipping, but
back then you could just cherry pick deals
off the MLS and crush it.
So made some decent money, rebuilt my credit.
And then I started running real estate investor
(05:22):
meetups, built a huge network of people, put
on a lot of events in the real
estate space.
And then it was kind of like a
dime a dozen business at some point.
So I'm like, I'm kind of bored of
originating fix and flip loans.
And so I got into commercial lending.
And through that, I discovered SBA lending where
I was like, it's an interesting industry because
it's not one size fits all.
(05:42):
There's lots of banks, lots of credit unions,
lots of non-bank SBA lenders.
Learned that industry.
And through that industry, people would come to
me and say, hey, can you fund this
anti-pretzel franchise?
And I'd always say, well, why this franchise?
Oh, we just like the pretzels.
And they never really had a good answer
why they were investing other than it was
usually like some kind of quick serve restaurant.
So then I somehow discovered that there was
(06:03):
actually franchise brokers and consultants.
So I actually joined a association and got
trained and spent years learning the industry and
actually knowing what I know now, I would
have loved to have started in this business
because it's so dynamic.
So with my background in lending and finance
and franchising, I'm a deadly weapon now.
And then I set out on a mission.
(06:24):
I first started with 10,000 people.
Like I finally got clear after many years
of business.
And I said, look, I've never really had
a mission.
I just like to help people.
So I got crystal clear on a mission.
And I said, I wanna help 10,000
aspiring entrepreneurs become successful business owners over the
next 10 years.
And then I just, I scratched that out
about like three months ago.
I go, 10,000 is really not that
(06:44):
many because I'm not saying I'll directly help
them but through my podcast and guesting on
podcasts like this I can help well over
10,000.
So I scratched it out and made 100
,000.
And then I'm like, you know what?
That's actually thinking too small.
And I set the target to touch a
million people in the next 10 years because
everybody should own a small business.
I believe everybody should own a small business.
(07:05):
I actually have a book that's in presale
right now.
That's about why everybody should own a business
and how to transition from corporate to owning
your business.
And I call it the triangle method.
It's tax strategy, operating business and real estate.
Right?
Like at first I was buying these rental
properties in the Midwest because I thought I
was gonna get all this cashflow.
Do you get cashflow?
Maybe a little bit, but the time you
(07:26):
do the CapEx and the repairs you're not
really cash flowing.
It's more of a long-term play.
Sold all those properties because I was like
that.
It's really a myth that you're gonna get
cashflow on long-term rentals especially if they're
cheap housing stock.
And so that's when the focus really went
into like if you really wanna create cashflow
you gotta own an operating business.
And that's like the love of what I
(07:47):
have right now.
And with SBA financing it's the most aggressive
financing out there if you can qualify.
So I think knowing that and pairing that
with franchising is like a perfect compliment to
really get out there and help people.
And my book it's called Paycheck to Freedom.
And I actually wrote it with a pretty
famous CPA.
His name is Tom Wheelwright.
(08:07):
So he's a rich dad advisor and he's
written a lot of books.
So that was pretty exciting for a first
book to have a co-author with somebody
who's sold hundreds of thousands of copies of
books already.
So excited for that to roll out at
the end of March.
And then I do a lot of virtual
events and summits.
I have one flagship summit that I call
Business Ownership Summit.
We do it quarterly online and we just
(08:28):
do deep dives on learning different franchise business
models, interviewing people that own businesses, bringing on
CPAs to talk about tax strategy and all
that good stuff.
So that's kind of the background of how
it all happened.
And I learn every day, always learning.
And I always listening to other people's podcasts
and there's a ways.
Every day I'm on a phone call or
a Zoom meeting with somebody like yesterday, for
(08:50):
example this stuck out with me.
I don't do a lot of like MCA
or any revenue based financing right now.
But like the guy was a chiropractor and
he's like, he started talking.
He's like, I heard you on a podcast
and I wanna do something.
I'm kind of stuck actually.
His business is doing fairly well but he
racked up some credit card debt.
And I'm like, really what you need to
do is do a revenue based loan because
(09:11):
his scores went down to 618.
A lot of people don't understand.
And you were always an advocate years and
years ago, right?
Like guys, you gotta keep your personal credit
pristine because even though they don't understand the
basic strategies of credit and what credit can
do to you.
And so like I gave him like 10
minutes I gave him a whole new plan
because he was kind of stuck and he's
an older guy.
And he's like, yeah, my business is doing
(09:33):
fairly well but I racked up X amount
of dollars in credit card debt and I
can't pay it down.
So I said, look, the high level you
can do some sort of revenue based loan
or financing with your deposits from your chiropractic
business.
Take that, pay off your personal, not supposed
to do, but pay off the personal credit
card debt.
Now your 618 credit score goes to 740
(09:55):
where you need to be, right?
Then I told him about why you wanna
build business credit because when I go into
a bank now, they're gonna, granted they pull
my credit but I'm pristine on that side.
And so then I gave him a whole
plan and we're gonna do SBA working capital
loan maybe potentially.
And then he, then where he's gonna open
a franchise that aligns with his chiropractic business.
(10:17):
So we're gonna do like a health and
wellness alongside and buy a building using SBA
financing.
So I gave this guy a blueprint but
there's a lot of people out there that
are stuck and that's what I think we
do well.
Yeah, and I love that.
I love the history of kind of where
you come from and what got you interested
in where you are.
So buy, build, franchise.
I oftentimes hear buy or build.
Franchise, they don't make the list in a
(10:38):
lot of cases and I don't know why.
So when do you think it's the right
time for somebody to consider buying a franchise?
So, I mean, a franchise is really a,
you're buying into a system and a marketing
strategy and it's a business in a box.
I hate to say that, but it's true.
Like there's well over 3,000 franchises and
most of the franchises we put our candidates
(10:58):
into are non brick and mortar.
They're usually in the home service, recession resilient
businesses.
Just to give you an example, I had
a gentleman come to me and he's like,
look, he does gutter sales for new gutters
and he did fairly well.
He made about a hundred grand a year,
but he's like, look, I'm not building anything.
I'm like the time you pay taxes.
He really wanted to own a painting company.
So we found him a painting franchise startup,
(11:19):
built in the franchise fee, working capital, all
that good stuff.
And the nice thing is, is when you
have small ticket franchises, meaning the total project
costs around 150 grand, there's banks out there
that will fund 90% even on a
startup.
So they're basing it on projections.
As long as it's an approved franchise.
Well, this guy got into business with 12
grand out of pocket essentially.
So we can help everybody and that's the
(11:41):
beauty of it.
And then going along with what you do,
I think there's such a need to educate
business owners on entity setup and building credit
lines on like how to really leverage because
most of us don't have several hundred thousand
sitting around in a bank.
We need to like leverage into financial freedom.
And I think if you do it in
the correct way, you'll win versus you do
(12:03):
it in the bad way.
So I see so many people, I get
this call when I get to the part,
how's your personal credit?
Well, it was good, but I started charging
up a lot of credit card debt and
I'm like, is that personal credit?
Yeah.
Okay, step one, don't do that because you
gotta keep your personal credit pristine.
And so like, it's so funny that so
many people don't even understand the basics of
(12:25):
credit where it's, I think everybody needs that
course first so they can leverage into these
businesses correctly because there is good debt and
there's bad debt.
So I see a lot of franchises that
are out there and they're pretty expensive to
get into.
Like I'm not drawing off the dollars, I
know nothing about them.
But that being said, I see it where
they've got, they're saying you need to be
(12:46):
prepared ultimately sometimes for hundreds of thousands or
even millions of dollars that you're going to
have to have for build out, for location,
for all these other things.
So do you think there's a lot of
different ways to get these franchises financed where
you don't have to come out of pocket
with all that money?
Yeah, I mean, SBA financing for one.
Generally, most banks are at 80% of
(13:07):
total startup costs, including working capital.
They'll fund 80% of total project costs.
For small ticket franchises, we have one or
two banks that are specialized on loans amounts
up to 150 and they'll do 90%.
They're the easiest bank to work with too.
So generally what we do is we give
people in a business assessment, it's kind of
(13:27):
like a disk profile on steroids with different
facets.
That helps us actually scientifically match what business
models might be a good fit.
Then we meet like we're meeting right now
over Zoom and I do a lot of
intake asking questions, getting to know them better.
From there, I kind of create a thesis
of what business models might be good.
Then I do territory checks.
(13:48):
If it's available in the market, I come
back to them and show them seven or
10 different business models.
I want them to look at two or
three and deep dive and learn about those
two or three.
It's kind of our general process.
And then there's multiple steps to learn the
business, to call other franchise owners.
We're essentially like really qualified buyers agent in
real estate.
That's kind of what we do.
And we don't actually charge them a fee.
We get paid from the franchise or a
(14:09):
referral fee.
So when you do that and you're helping
somebody set up a franchise initially, do you
deal with people coming to you and just
say, I want to launch a franchise or
people coming to you and say, I want
to launch a franchise in this industry or
are they very specific?
There are people come to you and say,
I need help financing and I want to
buy like Jimmy John's franchise and they know
exactly what they want to buy or is
(14:31):
it just like some of all of them?
It's everything.
So I talk a lot about SBA financing
or I have CPAs that refer me deals
like, okay, this guy's buying is in talks
to try to buy XYZ painting franchise total
costs are 200 grand.
Then I meet with them.
I do like a, I have an intake
form.
And okay, yeah, this like, because years ago
they had the SBA directory, which had approved
(14:52):
franchises on.
Didn't mean they're approved, meaning they're good franchise
means there was approved SBA on SBA list.
So banks used to say, okay, it's an
approved list.
We can do the funding.
Now each bank has a little different buy
boxes.
You know, every lender is completely different.
You could take the same deal to five
different banks, four say no, one say it's
yes.
And so in the franchise space, there's a
handful of big players that are the best
(15:13):
at franchise startup financing.
So I'll take people that, and just help
them on the financing side, or I help
people find and fund their business depends on
where they come.
So like, really, I call myself a business
ownership coach, which is like, look, any way
you need, I have people coming to me
for RV park financing.
I have people buying hospitalities that are Airbnb
operators, people doing franchising.
Like I just really want to help people
(15:35):
get to where they want to go and
to get where they want to go is
owning a business.
It's not working for somebody else.
Now working, there needs to be employees.
So I'm not saying like, it's just a
numbers game, but if you have the desire,
I think everybody should own a business.
So like, if you're an employee and you're
crushing it, maybe we get you into a
semi-absentee franchise model where it's like a
(15:55):
simple, more simple established business to run, but
because they're keeping their high tech job, making
400 grand a year, and they buy some
other type of business where they could be
semi-involved.
Some of them need to be owner operator
where you're in the business.
So when we do all this assessment, that's
how we match.
And that's like part of the dynamic.
It's not like owning a piece of real
estate.
It's moving parts as you're a business owner.
(16:17):
There's a lot to do.
So I also help people get into what
I call gateway businesses like vending machines.
So we work with a couple, they're not
franchises, they're business opportunities, and they sell packages
of machines.
They actually train you, you go to two
days of training, you get a business coach,
and they actually, some of these companies actually
will place the machines for you.
So on something like that, the beauty of
that is, is like if they buy 100
(16:39):
grand of machines, I can finance 90,000
of it with the bank.
So like you can get into this business,
you spend about one hour per week per
machine.
So there's a business for everybody, and it's
just about pairing them with the right business.
A lot of people got into short-term
rentals, and now they're like, hey, there's too
many regulations.
They wanna start buying inns and boutique motels,
(17:00):
all SBA eligible.
So there's really SBA, we're blessed as US
citizens to have such a cool program, because
most countries don't have any financing like this.
Now, not everybody can qualify, because like sometimes
they're in a bind and they make good
deposits.
That's why there's all this alternative financing, which
you are the master at, like MCA, revenue
-based, asset-based lending.
(17:21):
And now a quick break to hear from
our sponsor.
Hey, it's Ty Crandall with Credit Suite.
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(17:42):
.com forward slash consult to see how much
money you can get approved for today.
And understanding how all this financing works and
then putting it together, because sometimes you can
do an SBA loan and pair it with
equipment financing and keep under $500,000.
Because if you keep a loan, an SBA
loan under 500,000, they don't have to
look for additional collateral.
So there's all these things, the way we
(18:04):
work and we put together, they make a
lot of sense for people.
So what's really exciting though, is after you're
in business for two years, you can get
up to 100% financing on an SBA
expansion, which is amazing.
Or you own a, let's just say you
own an HVAC company, you've been running it
for a few years, you're doing good.
The competitor down the street is retiring, you
can go buy that business with 100%
(18:24):
SBA financing, assuming that everything falls in line.
So super aggressive financing out there, it's a
10 year term based on Wall Street Journal
Prime plus a margin.
If there's real estate involved and real estate's
a bigger component of the purchase, you can
amortize over 25 years.
So you can be creative.
And then you can do SBA five or
four deals.
You can do $20 million deals because it's
the first and the second.
(18:45):
So lots of ways to do it.
And then if it's in a rural area,
for example, let's say you're buying a assisted
living facility in a smaller town.
If it's under 50,000 population, we use
a map, you can actually do USDA BNI
financing up to $25 million.
So there's all these amazing programs that are
fingertips.
Most people don't know about them.
There's also state guarantee programs in certain states,
(19:06):
which are lookalike SBA programs, which can fit
a certain need.
So I just try to study and learn,
and I'm always going to conferences and listening
to webinars and learning about alternative financing.
Because for me, I just need to figure
out solutions for people.
And like how, is it me referring somebody
to somebody and building relationships with banks?
(19:26):
That's what I do.
And then on the franchise side, it's understanding
what the franchise is doing, figuring out what
franchise model makes best sense for somebody.
We also do resale.
So franchise resales too, as well.
Somebody who's retiring wants to sell their franchise.
We have inventory there.
So, Beau, you just mentioned a bunch of
off-the-cuff SBA programs.
(19:46):
And a lot of people don't know these.
A lot of people are familiar with the
7A loan, where you can get money for
working capital.
A lot of people are familiar with the
504 loan for fixed assets, such as real
estate.
So give me an idea here, because a
lot of people don't know that you can
use SBA to be able to get a
franchise.
A lot of people don't know that you
can use SBA to acquire a business.
A lot of people don't know you can
use SBA to start a business.
(20:08):
I mean, people are shocked that there's even
such a thing as SBA startup loans.
So give me an idea.
What are the different types of SBA loans
that are really out there and the purposes
that they really fill?
Like, you can use this to acquire.
You can use this to be able to
get working capital.
Give me a rundown of the SBA programs
that most people just are not familiar with.
Okay, so I'll just give you just a
(20:28):
case study.
Several months ago, a gentleman heard me on
a podcast.
It was a laundromat podcast.
And he said, look, I can't find one
to buy.
I want to start one.
And so he had figured out he was
leasing a property.
He found the spot.
He had the equipment invoices and the construction
bid.
It was a million two total project costs.
The guy had no laundromat experience.
(20:49):
The guy didn't own any additional real estate.
He had about 300,000 liquid.
That was about all we had going for
us in good credit.
And he had a job, outside income that
supports outside debts, good credit.
So I went to three or four banks,
got turned down.
Hey, it's a risky venture doing a startup
laundromat because the banks pull reports and so
(21:09):
forth.
But there's always a bank that understands an
industry.
So on the fourth bank, I took it
to.
Sure enough, they approved it.
They did 85% of total startup costs.
We did whatever that is, 1,000,022
on a construction build-out loan where they
didn't have any real estate and there was
a huge collateral shortfall.
So startups are financeable.
(21:30):
You gotta get a business plan.
You gotta find the right bank or lender
on that.
Of course, any owner-operated type of real
estate business with real estate is eligible.
So you're a CPA and you've been leasing
property for five years and you're like, I
need to own a building.
As long as you occupy 51% of
that space, you can get up to 100
% financing on the 7A.
(21:51):
So we call that a rent replacement deal.
Now you're capped at 5 million of total
aggregate SBA financing.
Although we have a new administrator that just
got appointed, Kelly Loeffler, I believe is her
name.
So the $5 million aggregate has been in
place since 2010.
I believe, and so do other people in
the industry, that that's gonna move up.
And I believe, my gut is saying 10,
(22:13):
but at least seven and a half million.
There's a lot of business acquisitions of business
acquisition as well, working capital as well, construction
deals.
So you're building office building for yourself.
They're rolling out a new pilot program for
working capital right now.
Partial buyouts, you can like, I've been working
for a company.
The guy wants to retire.
I'm gonna buy 81% of the business.
He's gonna stay on at 19%.
(22:34):
I guarantee the loan, he doesn't need to.
He gets some of his money.
So you weren't able to do a lot
of that years ago and they constantly update
the SOP.
So there's like a lot of cool things
you could do.
Right now I'm working on a deal that
the guy's buying an old RV park and
it's not been running, operating.
It's like pretty much, guy forgot about it
and owns it and doesn't care.
(22:55):
So the guy that's buying it is going
on and he's gonna put 13 tiny homes
on it and get rid of the two
or three people that are living on the
space right now.
And so it's like a $2.4 million
deal that's eligible.
And we can base it on projections.
So you can do projection based financing.
Obviously, if there's real estate involved, more banks
wanna do real estate.
Like some of the banks I work with
wanna do, they only will do SBA with
(23:17):
commercial real estate involved.
Some of the banks will do airball deals.
An airball deal means I'm doing a business
acquisition of an e-com business.
There's really no collateral.
And I might not even have any real
estate for them to collateralize.
That's okay.
As long as you get a bank on
board and you're buying a cash flowing business.
So basically I always tell people the same
thing.
Do you have good credit?
(23:37):
Yes.
Do you have a decent resume?
Yes.
Do you have outside income that supports outside
debts?
Yes.
Okay, good.
We're there.
Is the business in proximity of where you
reside right now?
Yes, that helps.
It doesn't, that's not a...
Okay, now we know you're probably gonna be
good there.
Do you have 10% of the total
project costs liquid or can you make that
available?
Yes.
Do you have a little bit of reserves?
(23:57):
Yes.
Cool.
You sound promising.
And so, but the real, when you're doing
a business acquisition, the real thing is getting
the tax returns from the business you're buying.
That's how we underwrite off SBA.
So we need, right now we need 2021,
22, 23.
You're in profit loss on 24 and a
balance sheet.
Once I get that, we spread it.
And I'm not a numbers person, believe it
or not.
I hate numbers, but I understand concepts.
(24:19):
So we spread the financials and we're looking
for on a business acquisition, you have to
have a debt service coverage ratio of 1
.15. Basically that's pretty low.
It means the business can support the new
debt payment.
There's a little bit left over.
So obviously that makes sense.
They don't wanna do a deal where they're
not cash flowing.
Sure.
So there's a lot of use cases, yeah.
So we can use SBA loans for just
(24:39):
general working capital for our existing business.
We can use it to purchase real estate.
We can use it to buy a franchise.
We can use it to acquire a new
business.
We can use it to launch a new
business or we can use it to acquire
a business.
We can use it to launch a new
business.
And depending on risk factors, we can get
anywhere between 80, 90% of the financing
(25:02):
we need.
What about the other 10%?
Do we have to have the 10%?
Does it have to come from us and
our cash?
Or as you know, I deal with a
lot of alternative financing options.
Can I get it through alternative financing?
Can I go in and look to buy
a business and get 90% from SBA
and then come in and get the other
10% using their account receivables and borrowing
(25:24):
against the existing company's account receivables?
Just a wild scenario.
Like, is there other ways we can get
the 10% down other than our money?
Or they want us to have the skin
in the deal.
Meaning, can we use the 10% to
be able to get it from somebody else?
Or can we use it from our own
personal assets?
Or can we use it from the assets,
for example, the business we'll buy?
Yeah, so you can get extremely creative.
(25:45):
So one thing is there's something called seller
carry on full standby.
So most banks want to see at least
5% equity injection from the buying party.
But some banks are as good as little
as 2.5% down.
So let me give you an example.
Million dollar acquisition of a business.
900,000 is financed by the bank.
100,000 needs to come in as some
(26:05):
sort of equity injection.
The seller can actually leave some of their
equity, it's called on full standby, for up
to 7.5%. So now that's 75,000.
So you got $900,000 first, seller carry
second at 75,000.
Now we got to come in with 25
grand, right?
To close a million dollar business that's cash
flowing and could replace your salary.
So that's pretty exciting.
(26:26):
If you can find the right business and
you can, okay.
Well, what if you're a little bit low
liquidity?
Now the deal's got to make sense.
Like you got to be able to, even
that you can do, it doesn't mean a
bank's going to do it.
But essentially I'll give you an example of
a deal that I'm involved in.
The guy came to me, actually my wife
is the investor in it because I helped
(26:47):
arrange the financing.
My wife, a friend referred this other gentleman
who's in a mastermind and he had found
a marina with a restaurant with 110 boat
slips.
And he's like, hey Bo, I found this
great business, it's great returns.
At least it looks that way.
The only problem is I just bought a
short-term rental.
I used all my money.
I go, okay.
He's like, can you help me find some
(27:07):
investors?
So the way we structured is we got
90% financing.
It was a $2 million acquisition, 90%
financing from the bank.
We had his brother come in with like
30 or 40 grand and then he needed
another a hundred.
So my wife came in with 50 and
my other friend came in with 50.
So my wife now owns 19% and
my other friend owns 19% and their
(27:28):
brother owns 13%.
And then anybody that owns greater than 20
% has to be a guarantor.
So the main borrower is the guarantor, right?
So- I just, I'm laughing because I
love it.
Only people that know that are going at
19%.
I'm the same way.
Every business I've owned or should be interested
it's all at 19%.
So I just had to laugh for a
second because only we would do that or
(27:50):
know that.
But anyways, I'm sorry, I didn't mean to
interrupt you.
Just made me laugh.
No, that's good.
So the point is, is you can bring
outside investors.
It's better when it should, technically it's not
supposed to be a loan, but yeah, so
you can get creative.
And so you can give ownership under 20
% of the business for the down payment,
or we call it an equity injection.
So on this million dollar example, I said
previously, you only got to come in with
25,000 because we're getting the seller to
(28:11):
carry back 7.5% on standby.
It's got to be on standby for at
least two years.
And that rule change, it used to be
the life of the loan.
Now the business has to cashflow that you're
buying.
And sometimes we have to structure the note
a little bit differently depending on the cashflow
requirements.
But you can have like two notes.
So sometimes you do a seller standby note
and then you have another note.
So there's ways of making the deal work.
(28:33):
So that's why when you're doing a business
acquisition, the first thing I always say is
get the tax returns because everybody tries to
send you P&Ls.
SBA is very strict.
They're going to underwrite based on the tax
returns of the selling business.
So we need to get those.
Then we come up with a plan.
Then you create an LOI, the buyer drafts
up an LOI so they don't get into
(28:54):
a business and have to retrade with the
seller because the seller is like, hey, you
wrote an LOI at a million.
Now you're telling me you can only do
eight.
We get the finances up front.
We can write a solid LOI and get
you ahead of the game.
Now, other creative financing options are, we already
talked about bringing an investor partner in.
You can actually get gifted the equity injection.
So it could come from a family member
as a gift.
(29:14):
A lot of times you could put HELOCs
on properties.
Maybe you have other businesses where you can
do revenue loan.
And then that business entity lends to this
entity or that entity becomes a partner in
the deal.
Potentially you could do some borrow against accounts
receivable on the business you're buying, like you're
talking about.
There's ways of structuring that.
That's not my expertise, but I'm sure you
guys have seen deals like that.
(29:36):
Yeah, there's really a lot of ways of
doing it.
And now there's actually companies that actually will
become an equity partner with you.
So after I, that's kind of like my
progression in the future is to start a
company that does that, that becomes the equity
partner that owns less than the 19%
and does it on cert, obviously you have
(29:56):
to cherry pick the deals, but I have
bankers tell me all day.
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