CRO @ Lendesca YouTube: https://xitter.cf/t.co/TCX8Y5k10J
South Florida
Joined December 2010
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Earlier this year, I resigned from my w2 job. But it wasn't actually the job I was quitting. I quit the business model.
I'm leaving behind the old SBA model to build the future one.
It's been said time and time on The Art of SBA Lending podcast. "The model is broken."
📉 How many SBA departments have you seen downsize and outright close in the past 24 months? A lot.
🏦 Only 13% of banks and CUs are participating in the 7(a) program despite it being such an amazing product for both the institution and the small business owner.
🔸And while the industry has made some progress, the SBA process has not caught up to the expectations of our borrowers. In fact, the gap is widening.
I'm tired of talking about the issues year after year. I wanted to finally do something about it. And now we are.
And I'm reuniting with some old friends along the way.
This might have been the worst kept secret in the world, butttt...
I'm officially part of Lendesca — a first-of-its-kind SBA fintech.
Our mission is to modernize the SBA lending landscape by bringing new SBA lenders into the ecosystem and allowing them to leverage our infrastructure to provide SBA loans faster and easier than ever before.
15 years into my SBA career and I couldn’t be more fired up.
Here’s to Act II 🥂
🎬
🔹 Supermarket operator (445110) buying a convenience store chain (445120)
🔹 Architecture firm (541310) buying an engineering (541330) or landscape architecture (541320) practice 🔹 Hotel operator (721110) buying a bed and breakfast (721191)
Couple caveats:
- Your business needs to have positive equity
- You cannot include working capital in the loan
At @LendescaLLC, we take a more modern approach to SBA lending. If you're a small business owner looking for capital to grow your business - the DMs are open!
🔹 Hair salon (812112) buying a nail salon (812113) or barbershop (812111)
🔹 Landscaping company (561730) buying a janitorial (561720) or carpet cleaning (561740) business
🔹 Hardware store (444130) buying a paint and wallpaper store (444120)
Why aren't more people talking about this new feature of SBA 7a loans?
If you own a business, you can borrower up to 100% financing to acquire another business as long as the first 4 digits of the NAICS codes match.
The rule used to be that it would have to be an exact match
SBA Ray retweeted
Last year, we acquired 2 businesses with nearly $3.5M in combined annual revenue.
It was one of the biggest learning experiences of my career.
Here are 4 lessons I'd share with anyone considering an acquisition:
1/ Look beyond the numbers
Financial statements only tell you part of the story. A business might be profitable, but what happens when the owner leaves? If they handle the biggest clients, make every major decision, and keep everything running, taking over won't be easy.
Before signing, find out how much the business depends on its current owner and what it would take to replace them.
2/ You're acquiring the team, too
One of the biggest surprises was how hard it was to make changes. Some employees had been working the same way for 10-20 years. You can't just walk in with a new plan and expect everyone to follow it.
Spend time getting to know the team and how they work, and plan for a slower transition.
3/ More revenue doesn't mean more profit
Adding millions in revenue sounds great, but there's a lot more to consider. You have debt to pay, people to manage, and costs you might not have planned for. We gained equity in larger businesses, but the impact on our cash flow was bigger than I expected.
Before buying, model the economics of owning the business, not just the purchase price.
4/ Everything takes longer than you think
We expected to have most of the integration work done within a few months. 18 months later, we're still making changes.
Give yourself twice as much time as you think you'll need, and make sure you have enough cash to cover the delays.
Looking back, my biggest lesson is that faster growth isn't always better growth.
For years I focused on growing as quickly as possible.
Now I'm much more interested in building a profitable business that can grow for years, even if that means growing a little slower.
Because building a bigger business isn't always the same as building a better one.
These are the realities of buying a business with leverage. Be smart about it!
Entrepreneurship Through Acquisition (ETA). Lower risk statistically than starting a business, but it is still entrepreneurship. Because of this I find it almost impossible to give searchers real advice outside of stating that the probability of them closing on a deal is low sadly (literally more buyers than sellers).
Over the last 3 years I probably talk to over 100 searchers a week. Basically 2 a week. Less than 2-3 percent have closed on a deal. What do they look like? Like me. These people find me because our backgrounds are similar (top school, investment banking and then hedge funds or private equity) so they are curious how our backgrounds translate into business ownership. In short outside of knowing how to work hard to find solutions, the answer is very little. Excel work doesn’t make an angry customer happy or prevent a key employee from leaving.
Below I share some of the outcomes of those I have talked to that have closed. Many have Ivy League degrees, MBAs with almost all of them starting their careers in investment banking.
- Growing business now but a terrible first 2 years means the return has been NEGATIVE and additional equity has been raised to fund working capital. Didn’t pay himself first 2 years. Business only turned around when he started putting in 6-7 day work weeks. Blue collar service biz. He’s optimistic but he’s made it clear the return on his equity has been negative thus far
- Growing biz but seller lied and big customer went away post close. Had to inject all of his personality liquidity to keep business afloat. Return also negative to date but reasons to be optimistic going forward after almost dying the first 2 years. Manufacturing biz. I’m betting on this guy to have a huge 8 figure exit down the road but it has been stressful AF for him
- Business growing and cash flow good. Biz was not SBA eligible so purchase price okay without buyer still thinks he overpaid but he’s done a great job of growing the biz. Manufacturing. Good outcome
- Highly sought after business. Multiple bids. I know other searchers that bid on it and lost. Business levered to unsustainable subsidies that everybody did diligence one and still bid. Bankruptcy. Lawsuits. Ugly
- Lab testing biz. Business growing organically and buyer closed on a tuck in. Going very well. 2027 is going to be a great year for his business
- Chiropractic clinic. Started out of the gates strong but now business super choppy with weeks w no lead conversion. Business was gushing cash the first 6-7 months but the last 3 months have seen a dramatic fall off in leads. Buyer isn’t sure why but is spending all of his time trying to figure it out. Cash flow sideways last 3 months
- 2 brothers did proprietary search for 2 years with no income. Sourced a biz in a super unattractive geography but closed. 2 years later biz has doubled and bankers pointing to valuations that could lead to 8 figure outcomes each. Home run
- Proprietary sourced deal closed 3 years ago. First year great. 2nd year big customer went away and cash flow negative. Growing off lower base this year but been a knife fight to win new business. Manufacturing
With the exception of maybe 1 or 2, every single buyer here has felt like bankruptcy was a real possibility. The good news is most have dug in and survived.
And these are the ones that closed. Many will never close as competition for these deals are higher now than 2022 when I closed despite rates being higher.
Bought an iPhone duo and a Tesla Model Y this week. Both are backordered, so now I have to wait 2 months. Now I know how SBA borrowers feel 😭
JUST IN: Two guys telling the truth about buying a business with an SBA loan
Live - What’s changing in the world of SBA lending with Ray Drew xitter.cf/i/broadcasts/1pKkOXvmX…
Wait, this is live?!
A live stream about SBA changes on the day the changes go into effect.
We might just break the internet on this one!
I want everyone to show up and interact with us as we run down the list of changes.
Whether you’re looking into an SBA loan for yourself or you deal with a lot of transactions that get financed with SBA, this is gonna be a really important discussion for you to attend.
@DBarnettMoncton
Yesterday I revisited my roots. I stopped by Central Florida’s own Portrait Bank — just a few blocks away from where I started my career as an SBA BDO — to talk about SBA lending, and told this story…
A local banker called me with a deal.
It was a metal fabricator that needed $2.2mm to buy and renovate a building.
And it had to close in 30 days.
Or the deal was dead.
I remember it like it was yesterday.
I show up, a 23 year old, in a loose-fitting suit.
Across from me, a 50 year old business owner.
HE was counting on ME to financing the LARGEST TRANSACTION of his life.
I could feel the weight on my shoulders.
This forever changed how I approached the job.
The SBA 7(a) program was around for decades before anyone really noticed it.
Banks had it on the shelf, but they avoided it like the plague.
More paperwork, more complexity. It was the loan of last resort.
Then in the '80s a lender called The Money Store came around and flipped the conventional wisdom on its head. They actually LED with SBA.
Over time, they scaled up to about 100 salespeople to tap into different markets all around the country.
They actively promoted the unique benefits of SBA:
- Lower equity requirements
- Longer terms
- Fully amortizing terms
And boy did it work.
They were the #1 SBA lender for 16 years straight - a record still held to this day!
By the '90s, GE Capital, CIT, and others had picked up the same playbook and ran.
The model has been essentially the same ever since.
Until now.
Check out my full episode on CEO Journeys with Paul Vedder to learn more about what we're building at Lendesca and our vision for the future of SBA lending.
This guy gets it... @RyanPaulCondie has one of the longest running ETA podcasts — period.
And after 5 years, l've returned to the hot seat to answer his questions on how the new SOP will impact his life as a business buyer and broker.
Spoiler alert: there's a lot.
Also: we delved into what we're doing at Lendesca to remove the manual processes from SBA lending.
Despite all the changes going on, I truly believe the best days are ahead of us.
There's about to be an entrepreneurial explosion in the United States and the SBA 7(a) loan program is going to be the rocket fuel that helps these businesses start, grow and change hands.
That's why it's super important we continue to innovate and push SBA lending forward to meet the demands of the modern day business owner.
This one's worth a listen. Link below:
Spotify: open.spotify.com/episode/2wC…
Apple: podcasts.apple.com/us/podcas…
Paul Vedder took out a seven-figure SBA loan to buy out his business partner.
So when we got into SBA on his podcast, he wasn't asking about it theoretically. He’s having to make payments on that bad boy in real time!
One thing he said stuck with me 👉 when you personally guarantee an SBA loan and put your house up as collateral, you're formally betting on yourself. You're telling the bank, "I believe in what I'm doing."
As a lender, that's the best thing you can hear from a borrower.
I joined Paul on CEO Journeys to talk through:
→ the history of the SBA 7(a) product as we know it today
→ My origin story as a content creator
→ The biggest lesson from my first failed business
→ What most people get wrong about SBA loans
I highly recommend you check out this episode youtu.be/ygxzIpLy3z4
SBA just banned 870k people — more than 10x the amount of people that were approved for a 7(a) loan last year — for being *suspected* of fraud 🤔
Today, SBA announced suspensions for 870,000 PPP and COVID EIDL borrowers tied to $39 billion in suspected fraud, in our biggest fraud action to date.
In total, the Trump SBA has now suspended about 1 million borrowers associated with $49 billion in suspected pandemic fraud across all 50 states and U.S. territories.
Also today, the agency announced “Operation No Doze” in partnership with @SBAOIG – a campaign that will send demand letters to suspected fraudsters across the nation, starting in Kansas and Missouri.
The agency has already referred $22 billion to Treasury – and will continue to partner with its federal counterparts across the Administration to both claw back stolen dollars and prosecute criminals to the fullest extent of the law.
legacy.sba.gov/article/2026/…
Small business owners ask me this constantly: if I'm coming to a bank because I need money, why does the bank expect me to already have money?
Fair question. Banks love lending to people with a ton of cash. That's just not the reality for most owners bootstrapping a business.
Here's what's actually going on.
Most SBA loans require a down payment. Once you stroke that check, your lender doesn't want you drained dry. You need something left over.
How much? Depends who you ask. Some say 5% of the project. Some say 7. Some say 10. Nobody agrees on the number, but everybody agrees you need it.
The next question is: what do you consider as liquidity?
Is a retirement account liquidity? A brokerage account? Cash sitting in a safe? Life insurance cash surrender value? Working capital funded inside the loan? Extra cash the investors are bringing to sit on the balance sheet?
How does "keep a rainy day fund" get this complicated? Leave it to SBA lenders.
But the reason behind it is simple. On a business acquisition, when — not if — something goes sideways, you need cash to make payments while you figure it out.
Post-close liquidity is your friend.
This woman is a legend!
Spending time with @SBA_Ray and @shorelinefilmmakers speaking with one of my favorite one of a kind businesses about the SBA Loan program @SBA_Kelly and how it helped them start their healing company. Video will be ready soon! Thanks Ray for including me trying Ozone Sauna.
