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Aug 1, 2014
Article #253
Author: Mel Jones

The value of an experienced Business Broker in handling an SBA transaction in the selling and buying of a restaurant is invaluable, and can make the difference between getting the deal done and having it fail.  There are few business broker who have the experience to handle such transactions as SellingRestaurants does.  We've done about 50 SBA transactions in the past 8 years.  So call us to help you. 

The first step is to prepare a financial analysis of your tax returns. I can do this for you.  Call me. This analysis will tell the bank whether or not the business has the cash flow to make the loan payment and to pay the buyer enough to have a living as well as have cushion when times get tougher.  The analysis should include clear explanation for anomalies in the numbers. The broker should have a complete detailed understand of all the numbers, the strengths and weakness. Here there is no time to hide things, because the bankers will find the holes. You or the broker need to be prepared.

The second step is to prepare all the documentation you'll need for the bank. Get three years tax returns. Get three years profit and loss. Get a detailed equipment list without prices/values. 

The final step is to find a buyer that's qualified. That’s another point we come in. There are four areas to qualify the buyer. 

First is their experience. SBA requires 5-year relevant restaurant management experience.  The more the better. 

Second is the buyer’s credit score.  Anything lower than 700 could be an issue.  Below 650, forgetaboutit!

Third, and final, is the buyer’s cash and assets.  Here is where it is a bit complex. You want a buyer with 20% down plus extra cash on top of it. How much extra I’d have to say 20-30% more than the down payment. They are strong if they have real estate with meaningful equity, but not required. But on the flip side, you don’t want the buyer to have too much cash. If the buyer has more cash than the purchase price, the bank will frown on that. If the cash they have is two times the price, the bank won’t lend to them.

Of course, it is all more complicated than what I’m writing here, but it gives the reader a feel for the process of getting their business ready for an SBA loan.


Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry.  Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer.  Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world.  There he participated in more than $11.5 billion of merger and acquisition transactions.  He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attened Law School at Gonzaga University.  Give Mel a call at 480.274.7000 or e-mail him at [email protected] if you have any questions. 


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