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The 2026 SBA Playbook: How to Buy a Business With 10% Down · Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast

• 0:00
  SPEAKER_02: The 7A program will finance 90% of your project.
• 0:03
  SPEAKER_02: 10% needs to come from you.
• 0:06
  SPEAKER_02: Which is, in my opinion, one of the biggest generational wealth opportunities of my lifetime.
• 0:11
  SPEAKER_01: Sellers are willing to work with you when you're the right guy, when they know that you're not going to throw Janice in the back office out on the street day one.
• 0:18
  SPEAKER_01: And I think that helps with the deal too, right?
• 0:19
  SPEAKER_02: I need to work with firms that are going to tell me when there's bad news.
• 0:23
  SPEAKER_02: If it's a crap of the deal, I'll tell you to run.
• 0:25
  SPEAKER_02: What are some of the ways that these deals are still getting done that are fine with banks and the SBA?
• 0:30
  SPEAKER_01: The path of absolute least resistance is.
• 1:19
  SPEAKER_02: I mean, you do everything, but a big portion of your deals are home services, right?
• 1:23
  SPEAKER_01: Yeah, the vast majority are uh the home services.
• 1:26
  SPEAKER_01: And then I'm seeing more manufacturing these days, but at the end, I'm I'm still 70% skilled trades, if not higher, the year to date as well.
• 1:35
  SPEAKER_02: Yeah, and I mean it's so I can't undersell how important it is to get a lender if you're thinking about doing a business acquisition through the 7-8 program or a business expansion to go with somebody who actually does home service deals.
• 1:52
  SPEAKER_02: Like ask your lender if you're not working with Alan, even Alan, ask him.
• 1:55
  SPEAKER_02: Call and say, hey, how many, how many home service deals have you done in the last year?
• 2:00
  SPEAKER_02: Because it it dramatically changes how the bank is willing to work with you for the actual individual deal, but like for the next 10 years, potentially, right?
• 2:09
  SPEAKER_02: Yeah, exactly.
• 2:11
  SPEAKER_02: It's huge.
• 2:12
  SPEAKER_02: Um, dude, Alan, there has been so much change since we last talked at the SBA.
• 2:18
  SPEAKER_02: Yes.
• 2:18
  SPEAKER_02: Um let's I mean, let's go through some of it.
• 2:22
  SPEAKER_02: But before we start, I just want to shout out like again, it's been awesome working with you.
• 2:27
  SPEAKER_02: Uh, like what what are some of those really neat changes that have come through?
• 2:32
  SPEAKER_01: Yeah, I mean, honestly, Jack, it's exciting.
• 2:34
  SPEAKER_01: Uh, the good news is you and I talk all the time.
• 2:36
  SPEAKER_01: Uh, but with these changes, I have never been more popular in my life.
• 2:41
  SPEAKER_01: Okay.
• 2:41
  SPEAKER_01: Uh, my inbox right now looks like a CPA single mixer, but nobody wants to buy me dinner.
• 2:47
  SPEAKER_01: You know what I mean?
• 2:48
  SPEAKER_01: They just want to know what's going on and they want my pipeline.
• 2:51
  SPEAKER_01: Uh it's funny, you know, when you think about some time that's gone by, when there was the last rule changes, you know, it was interesting.
• 2:59
  SPEAKER_01: Our timeline, you and I got to connect right around that time, too.
• 3:02
  SPEAKER_01: And you think about from then until now, you know, we've had listeners of yours uh turn into business owners, and that's been super, super rad.
• 3:11
  SPEAKER_01: Uh yeah, part of the reason I get excited about joining you.
• 3:14
  SPEAKER_01: And effective October 1st is the SBA update.
• 3:19
  SPEAKER_01: Okay.
• 3:19
  SPEAKER_01: And what's important to understand, guys, is that that is based on your SBA authorization number.
• 3:26
  SPEAKER_01: Okay.
• 3:27
  SPEAKER_01: Um, I don't want to get too into jargon, but it does not mean as long as you apply by October 1st, at the date of this recording, it would be it might be a little challenging, uh, but still possible to get that in.
• 3:42
  SPEAKER_01: Um with all the changes, right?
• 3:46
  SPEAKER_01: There's some that I really, really like.
• 3:48
  SPEAKER_01: There's some that I think, in my opinion, people are creating a little bit more excitement, a little more outrage, right?
• 3:56
  SPEAKER_01: Like, oh, they're doing this.
• 3:57
  SPEAKER_01: But if you look at it, Jack, I mean, I don't know if you had a change.
• 4:00
  SPEAKER_01: I know you follow this space pretty closely.
• 4:03
  SPEAKER_01: What did you think of the updates, man?
• 4:04
  SPEAKER_01: I mean, I think freaking out about any of them, to be honest with you.
• 4:08
  SPEAKER_02: No, I think that in in most cases, almost all of these updates are focused on making sure that the buyer is in a better spot with the lender and that the lender is in a better spot with the SBA.
• 4:22
  SPEAKER_02: And so, yes, they're they're tightening.
• 4:25
  SPEAKER_02: I mean, because we we both saw, for anybody who hasn't heard about it out there, right?
• 4:29
  SPEAKER_02: Their the default rate in March went up a little bit.
• 4:31
  SPEAKER_02: Yeah, so they they they ratcheted down a little bit.
• 4:33
  SPEAKER_02: Uh, but they didn't do it in a way that I think was overwhelming or overburdening.
• 4:38
  SPEAKER_02: I think that they just tightened some of the loose ends that they that they think that uh the defaults are kind of falling through.
• 4:45
  SPEAKER_02: Well do you think do you say that's accurate?
• 4:48
  SPEAKER_01: It's totally accurate.
• 4:48
  SPEAKER_01: I mean, the reality is you you got it spot on.
• 4:51
  SPEAKER_01: Uh, March 2026, early default rates that were reported up to then in the the most recent videos is 4.8%.
• 4:59
  SPEAKER_01: And you might think, uh, 4.8%, man, that's not bad.
• 5:02
  SPEAKER_01: I mean, we're talking about$8 billion with a B dollars in annual acquisition financing.
• 5:08
  SPEAKER_01: I mean, SBA 7A is how Main Street gets bought.
• 5:11
  SPEAKER_01: Uh, that's the reality of it.
• 5:12
  SPEAKER_01: I mean, if you can get a 100% seller finance deal on a business that is worth ask, please let me know.
• 5:20
  SPEAKER_01: Um, you know, me.com.
• 5:22
  SPEAKER_01: I take like I'm taking worse Calendleys than that.
• 5:25
  SPEAKER_01: Um, but you know, the the challenge is this.
• 5:28
  SPEAKER_01: I mean, you're right.
• 5:29
  SPEAKER_01: Entrepreneurial optimism and risk taking is the coolest thing about the United States of America, right?
• 5:36
  SPEAKER_01: I mean, it's it's the my family owned small businesses.
• 5:39
  SPEAKER_01: Uh, we were not in the trades, uh, we were in uh cash-only bars and restaurants in Scranton, Pennsylvania.
• 5:45
  SPEAKER_01: And so yeah, you know, we're a co-these were not used cars, Jack.
• 5:52
  SPEAKER_01: They're pre-on vehicles, all right?
• 5:54
  SPEAKER_01: Um live in Florida for a while now.
• 5:58
  SPEAKER_01: We're in Tampa.
• 5:59
  SPEAKER_01: Um and the reality is everywhere I talk to, what about the SLP?
• 6:04
  SPEAKER_01: What about the updates?
• 6:05
  SPEAKER_01: It's really, I mean, this batch to me is getting more of that, like, oh no, than even the last batch.
• 6:13
  SPEAKER_01: And it's to protect people, Jack.
• 6:14
  SPEAKER_01: I mean, the defaults tell the story.
• 6:16
  SPEAKER_01: Um, and I believe that most of these updates, if not all, are sincerely not to protect the gov, not to protect the billion-dollar institutions making these loans that the government backs so they take on more risk.
• 6:29
  SPEAKER_01: I promise you, it's also to protect these guarantors, these buyers, whether it's me or our friends at JP Morgan Chase SBA, uh, who I use because I don't think they do SBA, because Jamie Diamond doesn't need to do gov guaranteed lending.
• 6:44
  SPEAKER_01: Um, but dude, like it's it's the truth.
• 6:46
  SPEAKER_01: That PG is no joke.
• 6:48
  SPEAKER_01: And these guardrails, in my opinion, further protect you from doing something maybe you shouldn't.
• 6:54
  SPEAKER_01: The most people are upset, Jack, honestly, are guys I know that wanted to do micro PE funds and you know, back people with any exposure to anything, but writing a check for 50 grand and hoping to get rich.
• 7:08
  SPEAKER_01: And you you spray those checks enough places, winners out, the winners beat the losers, and you're doing well with really limited risk to yourself.
• 7:16
  SPEAKER_01: Nothing wrong with that strategy.
• 7:17
  SPEAKER_01: I know smart people have done it, but I know some people that really got jammed up when they were the ones signing on the line under those scenarios.
• 7:25
  SPEAKER_00: You've probably been pitched a dozen AI tools a day by now.
• 7:29
  SPEAKER_00: And most of them sound really great until your team actually starts using it.
• 7:32
  SPEAKER_00: The one that I continue to come back to is Avoka.
• 7:35
  SPEAKER_00: They built their platform specifically for contractors.
• 7:38
  SPEAKER_00: It handles inbound calls, follow-ups, texts, web leads, dispatching, and even CSR coaching all in one place.
• 7:46
  SPEAKER_00: If you're on ServiceTight and the integration is rock solid, no duck taping together five different tools.
• 7:51
  SPEAKER_00: What I also like is they're realistic about what AI can and cannot do.
• 7:54
  SPEAKER_00: When a customer needs a person, Avoka has 24-7 live transfers built in, so nothing's gonna fall through the cracks.
• 8:00
  SPEAKER_00: And the payoff is that contractors are seeing whole times disappear and booking rates increase by as much as 30%.
• 8:06
  SPEAKER_00: If you're serious about using AI to book more jobs, check out Avoka at the link below.
• 8:11
  SPEAKER_02: And so with that, dig into that a little bit because I know that's where I think one of the biggest SBA changes is revolving around kind of the search fund model of hey, there's a bunch of guys that are backing me as an operator, I put a little bit in.
• 8:24
  SPEAKER_02: What's the change regarding that on how you much equity or how much capital you need to put into a deal personally?
• 8:31
  SPEAKER_01: Yeah, yeah, absolutely.
• 8:32
  SPEAKER_01: So if it is your uh first time tuning in, or maybe you have limited exposure uh to SBA, the 7A program if will finance 90% of your project.
• 8:43
  SPEAKER_01: Your project includes the business you're buying, any working capital that you need.
• 8:49
  SPEAKER_01: Uh, you know, I always do a line of credit, so you have access, but you're not paying unless unless you need it.
• 8:54
  SPEAKER_01: Um closing costs, equipment if you want to carve it out outside of the APA.
• 8:58
  SPEAKER_01: All of that is the project, okay?
• 9:01
  SPEAKER_01: 10% of the project needs to come from you.
• 9:05
  SPEAKER_01: The bank's gonna make a loan for 90.
• 9:07
  SPEAKER_01: Okay.
• 9:08
  SPEAKER_01: Um, even five of that 10.
• 9:11
  SPEAKER_01: Let's use easy numbers because again, shout out Scranton, Pennsylvania, and the Penn State satellite campus.
• 9:16
  SPEAKER_01: I got uh through because my mom knew somebody.
• 9:18
  SPEAKER_01: Uh, anyway, uh 2% of that would be$50,000.
• 9:23
  SPEAKER_01: Million dollar project, 100 grand needs to come into the deal.
• 9:27
  SPEAKER_01: $50,000 of it can be from a seller note on full standby for the life of the loan.
• 9:34
  SPEAKER_01: That means that no payments are to be made or not due until the loan is either paid off or refinanced out of.
• 9:43
  SPEAKER_01: So secondary market data would tell me it would be abnormal for you to have an SBA 7A loan with no real estate, a 10-year term for a whole decade.
• 9:53
  SPEAKER_01: But the reality is the seller potentially is waiting for a decade, right, for you to for you to pay them back.
• 10:01
  SPEAKER_01: Um, but sellers do it all the time.
• 10:03
  SPEAKER_01: It's very common, especially when you have built a case while you're the right person for this business.
• 10:10
  SPEAKER_01: And people tease me, like, oh, that legacy stuff is cheesy.
• 10:13
  SPEAKER_01: Dude, talk to talk to my clients.
• 10:15
  SPEAKER_01: It's not cheesy.
• 10:16
  SPEAKER_01: It's how it's how it's getting done straight up.
• 10:19
  SPEAKER_02: I think we did a big section of that on LARPing as uh TV.
• 10:24
  SPEAKER_02: Yeah, and then you've got some good traction.
• 10:27
  SPEAKER_02: LARP as a private equity company.
• 10:30
  SPEAKER_01: I'm not gonna bring up how you had a LinkedIn view from someone from a firm that we had name-dropped making up the name of XY Capital.
• 10:38
  SPEAKER_01: Might have viewed your LinkedIn anyway.
• 10:40
  SPEAKER_01: Let's keep it moving.
• 10:43
  SPEAKER_01: Sellers are willing to work with you when you're the right guy, when they know that you're not gonna throw Janice in the back office out on the street day one, because that's what PE is gonna do.
• 10:53
  SPEAKER_01: I got bunnies in PE.
• 10:54
  SPEAKER_01: I know you're not all Darth Vader, but a lot of you are.
• 10:56
  SPEAKER_01: So um the reality is that's how you win.
• 10:59
  SPEAKER_01: What do you mean with the other the other half?
• 11:01
  SPEAKER_01: Well, before this update, that 5%, or even the whole 10%, could have come from silent, you know, minority investors, right?
• 11:12
  SPEAKER_01: Very often they weren't so silent, to be frank.
• 11:14
  SPEAKER_01: Um, but the idea would be hey, I'm gonna guarantee this million-dollar deal, this$900,000 loan, the$100,000 is gonna come from this fund.
• 11:24
  SPEAKER_01: Okay, now half of the money, okay.
• 11:27
  SPEAKER_01: So let me let me unwind this.
• 11:29
  SPEAKER_01: 10% in, 5% seller note, you gotta bring 50 grand in.
• 11:33
  SPEAKER_01: 25,000 of that has to be your money.
• 11:36
  SPEAKER_01: It has to be yours.
• 11:37
  SPEAKER_01: It cannot come from anywhere else.
• 11:40
  SPEAKER_01: If you have a rich uncle that wants to give you cash and a gift letter, that Don hunts.
• 11:46
  SPEAKER_01: Maybe.
• 11:46
  SPEAKER_01: If you have a rich uncle, let them know I'm still looking for one as a 40-year-old man.
• 11:50
  SPEAKER_01: It's not my reality, maybe it's yours.
• 11:52
  SPEAKER_01: If you get that going previously, you know, you can still have investors, Jack, but previously you could break them out in distributions.
• 12:02
  SPEAKER_01: That's gone.
• 12:03
  SPEAKER_01: The minority investors cannot get paid until the loan is retired.
• 12:09
  SPEAKER_01: Okay, if they can take tax distributions like to cover their taxes, that's it though.
• 12:13
  SPEAKER_01: And will there be workarounds?
• 12:15
  SPEAKER_01: I'm sure there are.
• 12:16
  SPEAKER_01: I'm sure there will be.
• 12:17
  SPEAKER_01: There's always going to be creativity, right, uh, around all of this.
• 12:21
  SPEAKER_01: But the reality is rolling the dice with a gov back program probably isn't the best idea.
• 12:26
  SPEAKER_01: Um, you know, just my two cents on it.
• 12:29
  SPEAKER_02: Yeah, and and so I mean, I think that's a very, very good take on it.
• 12:32
  SPEAKER_02: And again, like we said, I think it again to protect the individual so that you're not guaranteeing uh 900K and have zero dollars in and really not should you probably shouldn't be running this business because you don't have the experience or whatever, but you've got a check from a bunch of investors.
• 12:48
  SPEAKER_02: Uh like this really ties you into that more so than the personal guarantee would.
• 12:52
  SPEAKER_02: Um so I I mean I think it's a great move.
• 12:55
  SPEAKER_02: I I think it's uh applicable to the reasons why.
• 12:59
  SPEAKER_02: Um, but that that's one of the bigger ones that I saw come through.
• 13:03
  SPEAKER_02: What what are some of the the other items that you saw on the SBA 7A?
• 13:08
  SPEAKER_02: Because I think dovetailing, though, one of the interesting ones is uh having to revolve around, like speaking of sellers, the how long the seller can stay on and the importance of the seller staying on.
• 13:19
  SPEAKER_01: Yeah, no, that's that honestly is the second one, in my opinion, that affects this world directly, uh, the entrepreneurship through acquisition model.
• 13:28
  SPEAKER_01: I mean, previously the seller, so the rules are the rules, right?
• 13:33
  SPEAKER_01: At a total change of ownership, the seller may not be an employee nor officer of the business post-closed.
• 13:41
  SPEAKER_01: However, they may be an advisor or a consultant, paid or unpaid, depending on how good you're at negotiating.
• 13:49
  SPEAKER_01: The fur was uh for a period not to exceed 12 months.
• 13:52
  SPEAKER_01: Today, it or October 1st, excuse me, it's going to be out to 24 months.
• 13:58
  SPEAKER_01: So now you have the seller is able to hang around for two years.
• 14:03
  SPEAKER_01: And the immediate thing is that that's that gives that de-risks the opportunity, man.
• 14:08
  SPEAKER_01: I mean, it really does.
• 14:09
  SPEAKER_01: You're talking about the biggest thing we're always worried about is transitions.
• 14:13
  SPEAKER_01: That's why we're harping on things like true experience, right?
• 14:17
  SPEAKER_01: Like what have you done that's adjacent to this or truly transferable to what you're doing?
• 14:22
  SPEAKER_01: And maybe the answer is not that you've turned wrenches.
• 14:26
  SPEAKER_01: That's okay.
• 14:27
  SPEAKER_01: But have you meaningfully managed budgets, people, operations?
• 14:31
  SPEAKER_01: Do you have some credit?
• 14:32
  SPEAKER_01: Do you have a story to tell?
• 14:33
  SPEAKER_01: Those are the folks I help every day.
• 14:35
  SPEAKER_01: You know what I mean?
• 14:36
  SPEAKER_01: Um, but you have to you have to kind of keep things in perspective is that we are trying to protect you from yourself in some cases.
• 14:46
  SPEAKER_01: Um, and when we're looking at that for 24 months, it also helps with licensing, Jack.
• 14:52
  SPEAKER_01: I mean, how many times a day do people ask you about licensing strategies when they're buying their first deal?
• 14:57
  SPEAKER_02: Almost every day is I hear some a question in regards to licensing.
• 15:01
  SPEAKER_02: And I have a question for you on the back end of this because I got a crazy one in the inbox and I think that it's uh applicable.
• 15:07
  SPEAKER_02: Yeah.
• 15:08
  SPEAKER_02: So, okay, well, I'll tell it now.
• 15:10
  SPEAKER_02: Uh, so I have one uh and excuse you if you're listening.
• 15:13
  SPEAKER_02: I don't think you're crazy.
• 15:14
  SPEAKER_02: I think that the bank is crazy behind you, whoever you talk to.
• 15:18
  SPEAKER_02: Um, but I got a question saying that the SBA required that the person was who is licensing with the old owner.
• 15:26
  SPEAKER_02: It was a HVAC company, the old owner was going to stay on in a consulting role and QA the license.
• 15:31
  SPEAKER_02: Uh and they said that they wouldn't do it unless the owner had a PG, even though he's just a consultant, he sold the business, he has no assets in it, has no equity, uh, but he has to PG the business due to uh holding the license.
• 15:48
  SPEAKER_02: What is that a SBA rule?
• 15:52
  SPEAKER_02: No.
• 15:54
  SPEAKER_02: No, it's not.
• 15:55
  SPEAKER_02: Yeah, yeah.
• 15:56
  SPEAKER_02: And that's like going back to the initial conversation is I was like, hey, buddy, talk to Alan.
• 16:00
  SPEAKER_02: Like this is not like you need to talk, even if not Alan, talk to any other lender.
• 16:05
  SPEAKER_02: Like, because that that's not a that's an internal banking rule that they're trying to get comfortable around you not holding license.
• 16:12
  SPEAKER_01: Yeah, and and and every situation is unique, but it's the rule of two masters, right?
• 16:16
  SPEAKER_01: The SBA rule is non-negotiable, bank overlay far too often by well-meaning folks with no malicious intent that do what I do misrepresent their bank policy for SBA policy.
• 16:27
  SPEAKER_01: The SBA does not have set rules or guidelines around licensing.
• 16:33
  SPEAKER_01: Now, ensuring the continuity of the business operation to generate income to repay the loan, well, that's good business sense.
• 16:41
  SPEAKER_01: That's prudence blending, right?
• 16:43
  SPEAKER_01: That's what we're tasked by doing.
• 16:44
  SPEAKER_01: How we get there, that's where the creativity of this comes into place.
• 16:49
  SPEAKER_01: I mean, I'll be honest, Shaq, every buyer's a little different, but a lot of folks, I mean, heck, dude, I just did a deal in California, and the individual needed a license that was gonna be four years of direct industry experience that they needed, right?
• 17:04
  SPEAKER_02: Before California is a rough state, rough state for licensing.
• 17:08
  SPEAKER_01: It's it's rough.
• 17:08
  SPEAKER_01: And the reality though is I've seen a lot of good deals getting done in California still.
• 17:13
  SPEAKER_01: It's a big state, there, it's a large economy.
• 17:16
  SPEAKER_01: And there's some, you know, this is an interesting world because you know, my buyers like Alan, what are we gonna do?
• 17:22
  SPEAKER_01: You know, and and and what we've discovered is that in California, the he had uh an education that counted.
• 17:30
  SPEAKER_01: He just had a bachelor's in business, not in any specific trade or anything, not even uh project management, Jack, right?
• 17:37
  SPEAKER_01: Not even construction management, just not construction management, yeah.
• 17:39
  SPEAKER_01: Yeah, yeah, just a business degree that you get like when when when you don't know what else to do, and you uh and you're 12 and you're 18 years old.
• 17:48
  SPEAKER_02: Um, but but he Alan doesn't mean that, guys.
• 17:51
  SPEAKER_02: Alan doesn't mean that.
• 17:52
  SPEAKER_02: He said business degrees are well worth it.
• 17:54
  SPEAKER_02: You guys are awesome.
• 17:56
  SPEAKER_02: Don't listen to anything you said.
• 17:57
  SPEAKER_01: Every penny, every penny.
• 17:59
  SPEAKER_01: I mean, I started as an English major because I knew how to read and write.
• 18:02
  SPEAKER_01: I'm not judging anyone, okay?
• 18:04
  SPEAKER_01: And I switched to business because I was 19 and that's what I thought I should do.
• 18:08
  SPEAKER_01: It worked out well for me.
• 18:09
  SPEAKER_01: I'm sure it worked out great.
• 18:11
  SPEAKER_01: It worked out great.
• 18:12
  SPEAKER_01: Um that counted, Jack.
• 18:14
  SPEAKER_01: So he did have an MBA, so I would have to fact check myself on if it was the MBA angle or just the bachelor's, but I want to say it was it was just the bachelor's.
• 18:23
  SPEAKER_01: I think it was just the bachelor's.
• 18:24
  SPEAKER_01: And Jack, it knocked out three years of the required four years.
• 18:28
  SPEAKER_01: So month 14, right?
• 18:31
  SPEAKER_01: This day 367, he can sit and take the exam himself after 12 months.
• 18:37
  SPEAKER_01: The seller was going to hang around.
• 18:38
  SPEAKER_01: Now, in that case, we still had a uh minority partner that he brought on.
• 18:44
  SPEAKER_01: He gave equity to the key employee.
• 18:47
  SPEAKER_01: This was the estimator, this is the guy making sure we were pricing right.
• 18:50
  SPEAKER_01: This was the seller's left hand, right hand, I don't remember which one, but you get it.
• 18:54
  SPEAKER_01: And ultimately, but we got the deal done.
• 18:57
  SPEAKER_01: Now, with two years, Jack, that is gonna significantly ease a lot of these scenarios where, hey, man, I can sit in month 12.
• 19:06
  SPEAKER_01: I'm at the seller for 24 months.
• 19:09
  SPEAKER_01: I've shown that I can put this together.
• 19:12
  SPEAKER_01: I'm training, I'm doing, you know, show me something that you're working in that direction.
• 19:16
  SPEAKER_01: I'm not promising you that I'm gonna approve the loan, you know what I mean?
• 19:20
  SPEAKER_01: But the reality is you're in a lot better footing with two or four years of support.
• 19:25
  SPEAKER_01: You know what I mean?
• 19:26
  SPEAKER_01: So that's a great thing, in my opinion, that really benefits the buyers and especially for your audience and the folks I deal with in the skilled trades.
• 19:36
  SPEAKER_02: So, with uh along that same vein, just because it's it is the question that I probably get asked the most out of any other question, it's talking about uh strategies for obtaining a QA if you aren't able to have a QA.
• 19:50
  SPEAKER_02: Maybe it is, hey, Chicago, Illinois, you need four years of to become a master plumber, but you want to buy a plumbing agent or plumbing business.
• 19:58
  SPEAKER_03: Yeah.
• 19:58
  SPEAKER_02: Uh what are some of the ways that these deals are still getting done that are not again, I'm not talking gray area or black area, but that are really uh like a bar that are fine with with banks and the SBA.
• 20:11
  SPEAKER_02: Listen, everything we do is gonna be of above honesty, and not just because uh my boss who who you met carry uh No, but it's so the reason I preface that is not because anything that we do are is below, but the reason I preface that is just because I think that the initial idea is that when people who don't understand the industry come in and and they they're trying to get the license, they feel like this is slimy or gross.
• 20:35
  SPEAKER_02: And it's like, no, this is just how the business works sometimes, is you don't have the license.
• 20:39
  SPEAKER_02: You need some that's why there's a QA process.
• 20:42
  SPEAKER_01: Exactly.
• 20:42
  SPEAKER_01: And you know, the reality of okay, the last one I called, right?
• 20:46
  SPEAKER_01: Like two weeks ago.
• 20:47
  SPEAKER_01: That individual, what they chose to do, and this was at my advice.
• 20:51
  SPEAKER_01: We had talked for the first time, like check like nine months ago, I think.
• 20:56
  SPEAKER_01: And because he didn't know where to start, and where you start is a conversation.
• 20:59
  SPEAKER_01: I got them a buyer pre-qualification letter.
• 21:02
  SPEAKER_01: You know, obviously for you know, your folks, I don't that's free.
• 21:05
  SPEAKER_01: You know, you get me as an advisor ongoing or whatever.
• 21:07
  SPEAKER_01: And you know, what the the point is, we looked at, we kissed a lot of frogs, trying to find the right deal, right?
• 21:14
  SPEAKER_01: So we find, but I advised him, I said, listen, brother, what you need to do is find a business.
• 21:20
  SPEAKER_01: Refine your search in a way where we find the business that has someone else that can qualify or be able to qualify within a reasonable amount of time.
• 21:31
  SPEAKER_01: So if you've got the seller and a bunch of folks that have are not as tenured or experienced, or quite frankly, they're not, they don't want to do it, right?
• 21:40
  SPEAKER_01: Inside for whatever reason, maybe maybe we refine our search to where there's a little bit of a bench.
• 21:45
  SPEAKER_01: In this example, we uh he had brought in the estimator for the 1%.
• 21:50
  SPEAKER_01: So this was the like I shared earlier, this is an exact same story.
• 21:54
  SPEAKER_01: This is the exact same playbook, uh, listeners, right?
• 21:57
  SPEAKER_01: If you can pull this off, it's the easiest way.
• 21:59
  SPEAKER_01: 1%.
• 22:00
  SPEAKER_01: To them structured in a way where they my buyer, the majority, the actual borrower, the 99% post-close, can buy them out at tomorrow's value.
• 22:12
  SPEAKER_01: So you're protecting your equity long term when you do the aggressive roll up and PE exit in five years, like everyone on Instagram is trying to do.
• 22:25
  SPEAKER_01: One, our guy only had a date scheduled to sit.
• 22:29
  SPEAKER_01: Okay.
• 22:29
  SPEAKER_01: So the 1% person was able to take the exam, but we were still able to get comfortable because they had significant experience and they were literally going to be sitting 30 days close closed.
• 22:42
  SPEAKER_01: It was just where the calendar of the testing worked.
• 22:45
  SPEAKER_01: It wasn't offered all the time.
• 22:46
  SPEAKER_01: So as a bank, we made a common sense decision.
• 22:48
  SPEAKER_01: We did that.
• 22:49
  SPEAKER_01: The seller was going to be there for a year anyway as a backstop for the qualification.
• 22:53
  SPEAKER_01: We figured if this guy can't pass this exam in 12 months and he's been with this company.
• 23:01
  SPEAKER_01: I'm sorry, payroll reports.
• 23:05
  SPEAKER_01: This was the key employee, okay?
• 23:08
  SPEAKER_01: Thankfully he passed on the first try and they're doing well.
• 23:11
  SPEAKER_01: But that's just that's a playbook.
• 23:13
  SPEAKER_01: And you know, there's a lot of different like smart strategies that I get excited about, but I want to go in order.
• 23:19
  SPEAKER_01: I mean, as far as the licensing guys, 24 months is gonna ease it up.
• 23:23
  SPEAKER_01: Have a plan, have a strategy.
• 23:25
  SPEAKER_01: If you don't have a license, you don't have a partner with a license.
• 23:29
  SPEAKER_01: There's ways that we can talk about strategy to make sure you'll be compliant.
• 23:35
  SPEAKER_01: The last thing you want to do is waste 90 days of your life and find out you can't get something done.
• 23:39
  SPEAKER_01: It's not a good feeling when that could happen.
• 23:42
  SPEAKER_01: Yeah.
• 23:43
  SPEAKER_02: So, okay, so yeah, there's still a few ways, right?
• 23:46
  SPEAKER_02: You still now use the the old owner.
• 23:48
  SPEAKER_02: There's no weird PGs or anything, at least with some banks.
• 23:51
  SPEAKER_01: Uh the one percent go, by the way, we don't make it I don't want to speak on behalf of our.
• 23:58
  SPEAKER_01: We've never had them need to PJ, okay?
• 24:00
  SPEAKER_01: So things change over that.
• 24:02
  SPEAKER_02: It's one percent, yeah.
• 24:04
  SPEAKER_02: Old owner can stay on for the two years.
• 24:06
  SPEAKER_02: You have to have a plan after within that time period to get a new uh coming into that understanding that it is a possibility.
• 24:13
  SPEAKER_02: Second is picking a a qualified person on staff who can get it at the time of transition or kind of around the time of transition.
• 24:23
  SPEAKER_02: Yeah.
• 24:23
  SPEAKER_02: The other ways that I've I've historically heard is you come into the deal with a partner pre-existing, who has some level of ownership.
• 24:33
  SPEAKER_02: Um and then I mean though I like I I I don't want to beat the dead horse here because I don't feel like it gets much crazier than that.
• 24:41
  SPEAKER_02: It's really just finding someone who can qualify and then bringing them on staff, whether that's equity, if they're going to be your your technical partner and or even just payroll with a very, very small equity or no equity at all to be um uh just an employee that holds.
• 24:59
  SPEAKER_01: Yeah, all of the above, right, is certainly you know allowed by the SOP.
• 25:05
  SPEAKER_01: And I like that you brought that on, though.
• 25:07
  SPEAKER_01: My favorite way, the the past of absolute least resistance is if you proactively have somebody.
• 25:14
  SPEAKER_01: I had a guy out of Texas who's uh um in plumbing is his discipline, and you know, he had helped he came in and helped qualify this deal, but he was going to be a minority partner, not stroking a check, but actually advising, actually providing value.
• 25:32
  SPEAKER_01: We've used him for more than one deal.
• 25:34
  SPEAKER_01: We know him, and they're paid as a green, Jack.
• 25:36
  SPEAKER_01: You know what I mean?
• 25:37
  SPEAKER_01: Like that, like that, and my first clock that found him was posting in a Facebook group specifically for and and they're like, Hey, you know, we're just looking for some mentorship.
• 25:47
  SPEAKER_01: We'd love the opportunity to speak with the master plumber.
• 25:50
  SPEAKER_01: We're trying to get on this journey, and we'd love the opportunity just to pick your brain about things that we might not be anticipating, anything we should look out for.
• 25:58
  SPEAKER_01: And then I thought it was awesome that someone in a senior role would share that experience with them so freely.
• 26:04
  SPEAKER_01: They hit it off so well.
• 26:06
  SPEAKER_01: That conversation wasn't a hard one.
• 26:08
  SPEAKER_01: It was uh, hey, sweat equity, really brain equity.
• 26:11
  SPEAKER_01: We're gonna sweat.
• 26:12
  SPEAKER_01: You're just gonna you're gonna help us make sure that what we're trying to do is making sense.
• 26:16
  SPEAKER_01: Oh, and by the way, we can legally operate the business.
• 26:19
  SPEAKER_01: So yeah.
• 26:20
  SPEAKER_02: And I think that helps with the deal too, right?
• 26:22
  SPEAKER_02: Yeah, yeah.
• 26:22
  SPEAKER_02: Coming into a brand new deal, especially like using your example, plumbing.
• 26:26
  SPEAKER_02: This individual, if they've worked at a high to medium to high level of management, understands the differences between the types of plumbing, construction, remodel, service, what is, what isn't, commercial versus industrial, like all of these kind of intricacies and nuances to specific businesses.
• 26:45
  SPEAKER_02: So now you come into this business buying it, and not only do you have your license, it's no longer a question, but you also have uh like somebody who's on your team.
• 26:55
  SPEAKER_02: Again, now back to kind of full circle, making sure that this deal is a good deal because like you want you want to succeed, you want it to thrive.
• 27:03
  SPEAKER_02: And it doesn't even have to be a giant, it's just again, like you said, some level of consorting and making sure that you're not you know shooting yourself in the foot.
• 27:11
  SPEAKER_01: Somebody who knows the stuff that you are not going to think about that you're not gonna know.
• 27:16
  SPEAKER_01: Someone who's gonna tell you maybe you don't need a fleet of wrapped vans, and you can actually do the same with the the smaller Ford Rangers with a cap on it.
• 27:24
  SPEAKER_02: Ford Maverick, yeah, watches my content, Alan watches my content.
• 27:31
  SPEAKER_01: You saved a ton of money doing it that way, and it was the same outcome.
• 27:34
  SPEAKER_01: In fact, a better one.
• 27:36
  SPEAKER_01: I mean, yeah, who's you to know that though?
• 27:38
  SPEAKER_01: You know, not not not even, you know, and and and I do it, by the way, it's good.
• 27:41
  SPEAKER_01: But the reality though is these that's kind of that mentorship's awesome.
• 27:46
  SPEAKER_01: Now, listen, if you don't have that, that's all right.
• 27:49
  SPEAKER_01: There's still a lot of great stuff.
• 27:50
  SPEAKER_01: You can listen to you and John, right?
• 27:53
  SPEAKER_01: And and also do your own thing and find somebody qualified.
• 27:57
  SPEAKER_01: But the the message I'm trying to convey, and I'm using too many words as standard for me, is there's a way, right?
• 28:03
  SPEAKER_01: If you've got a great, you've got a drive, you've got a real story, let's talk about it.
• 28:07
  SPEAKER_01: You know what I mean?
• 28:08
  SPEAKER_01: And and you'd be surprised that there is a way when we find the right deal.
• 28:13
  SPEAKER_02: Awesome.
• 28:13
  SPEAKER_02: I I agree.
• 28:14
  SPEAKER_02: I think that hopefully people listening that answers the question pretty plainly for them.
• 28:18
  SPEAKER_02: Yeah.
• 28:18
  SPEAKER_02: Um, and so that that's a big one.
• 28:20
  SPEAKER_02: I think that that expanded again your optionality.
• 28:22
  SPEAKER_02: Uh the SOP expanded your optionality for that specific item.
• 28:26
  SPEAKER_02: Are there any other uh, I guess, big ones that you can think of?
• 28:30
  SPEAKER_02: There's some small ones, so I'm gonna knock out one of the small ones real quick.
• 28:33
  SPEAKER_02: Like the 1.15 to the 1.25 DSCR debt to service income ratio.
• 28:39
  SPEAKER_02: So like there's a lot of things in there that's something, but it's not really relevant to most listeners just because we're in on 1.15s anyway.
• 28:50
  SPEAKER_02: Right.
• 28:50
  SPEAKER_02: Yeah.
• 28:51
  SPEAKER_02: So that's like saying you're no longer gonna get a mortgage at 3% tomorrow.
• 28:54
  SPEAKER_02: Yeah, but you're gonna get a mortgage at 3% anyway.
• 28:57
  SPEAKER_02: So it's not gonna happen.
• 28:58
  SPEAKER_02: It's not a thing.
• 28:59
  SPEAKER_02: Um but that being said, there's there's like one, I think one more that I can think of big item is it do you have any more besides I I'm gonna jump ahead and say the um the QE.
• 29:10
  SPEAKER_02: Is there any more outside of the QoE that are kind of relevant to the conversation in the average listener?
• 29:16
  SPEAKER_01: No, no, no.
• 29:17
  SPEAKER_01: That's that's a big one.
• 29:18
  SPEAKER_01: And and honestly, there's a lot of people that are really excited about this quality of earnings thing, right?
• 29:25
  SPEAKER_01: And the the reality is for deals 3 million and above, I was always advocating strongly for unbiased third-party financial due diligence from a credentialed firm or individual.
• 29:38
  SPEAKER_01: That has always been my take.
• 29:40
  SPEAKER_01: I mean, I'm not personally going to guarantee a loan for$750,000 for a half a million bucks, let alone$5 million, unless I'm at least getting a cash proof, which uh, you know, to break it down plainly, it's the exercise of tying the business's bank statements to the profit and loss report to see exactly what's what, right?
• 29:59
  SPEAKER_01: So, you know, that's not new, Jack.
• 30:01
  SPEAKER_01: What's new and has people excited is that the bank needs to order the report.
• 30:08
  SPEAKER_02: So the guidance is yeah, if a bit yeah, if the business, if you're buying a business over three million, like Alan said before, like I did a QE on a business that was 750,000 in revenue.
• 30:21
  SPEAKER_02: So, like again, it it's worth it at the smaller levels.
• 30:24
  SPEAKER_02: Almost all banks are going to require some level of it.
• 30:27
  SPEAKER_02: Uh it's not overly new, but the nuance that has changed is that once it's over three million, it is now required, and it's required by the bank now.
• 30:36
  SPEAKER_01: Like the bank has to order it.
• 30:38
  SPEAKER_01: Correct.
• 30:39
  SPEAKER_01: So the guidance that we're hearing, and this is as of September 9th, uh, 2026, at 4 p.m., because they might issue what's called a technical update, and they're trying to now to make that more clear and to ease that.
• 30:53
  SPEAKER_01: There's some really smart people championing that with the SBA directly, saying, hey man, we got to figure out what this is.
• 30:58
  SPEAKER_01: The misconception, in my view, is that people are saying that they cannot select their own provider, that the bank is going to dictate who is running through the numbers.
• 31:10
  SPEAKER_01: Now, the reality is, again, some banks might.
• 31:14
  SPEAKER_01: Okay.
• 31:14
  SPEAKER_01: The way that we are looking at it today is that if you have a credentialed experienced with this kind of you know, exercise with the quality of earnings, that as long as there's like a their credential to have reasonable professional liability insurance, we just have to order it.
• 31:30
  SPEAKER_01: The email comes from us, the engagement comes from us, the report is delivered to us.
• 31:36
  SPEAKER_01: Now, reliance letters and things like that, Jack, which that is where it gets a little bit dicey because there are a lot of quality earnings providers that will give you this labor that they've done, you know, sometimes 30 days on this stuff in a beautiful deliverable.
• 31:52
  SPEAKER_01: And at the end, there's an asterisk and says, Yeah, but like, you know, it is what it is, you know, maybe it's real.
• 31:58
  SPEAKER_01: We're not sure.
• 31:59
  SPEAKER_01: You know, my my guy gives them$18,000 and they can't promise me it's real.
• 32:03
  SPEAKER_01: That that's what against, that's what against IC.
• 32:06
  SPEAKER_01: And but the way that we're looking at it right now is that if they're legit firms, they're credentialed, they have a licensure, and we can rely upon their numbers, absolutely use your guy.
• 32:16
  SPEAKER_01: We don't want to dictate that.
• 32:17
  SPEAKER_01: Because we were on the campfire.
• 32:18
  SPEAKER_01: When I saw on Twitter today, were people saying, well, the bank is just going to do the best, crappiest option.
• 32:26
  SPEAKER_01: That is the most ridiculous thing in the world.
• 32:28
  SPEAKER_01: One, the bank is not paying for this.
• 32:31
  SPEAKER_01: You are, okay?
• 32:32
  SPEAKER_01: The bank does not, the economics of it do not benefit nor hurt the bank.
• 32:37
  SPEAKER_01: We credit that towards your equity injection, and I can get into that later.
• 32:40
  SPEAKER_01: It goes towards a down payment in simple terms.
• 32:43
  SPEAKER_01: But why would the bank put at risk their portfolio?
• 32:47
  SPEAKER_01: They're going to lend$3 million and they're going to use somebody legit.
• 32:53
  SPEAKER_01: It's foolish.
• 32:54
  SPEAKER_01: There's a lot of people that are excited about all of this, and most of them are the smaller quality of earnings providers that are now emailing me saying we're going to prioritize our lead flow to people that use us for email.
• 33:08
  SPEAKER_01: You sent me and I don't do that.
• 33:10
  SPEAKER_01: I don't dance, I'm not dancing for cannabis.
• 33:12
  SPEAKER_01: Like I need to work with firms that are going to protect my buyers.
• 33:16
  SPEAKER_01: I need to work with firms that are going to tell me when there's bad news.
• 33:19
  SPEAKER_01: Okay.
• 33:20
  SPEAKER_01: Where it's not, this isn't a seller's game.
• 33:22
  SPEAKER_01: I work well with sellers.
• 33:24
  SPEAKER_01: I'm a CEPA, I'm a certified exit planning advisor.
• 33:26
  SPEAKER_01: Look at me.
• 33:27
  SPEAKER_01: I can talk both sides of the table, right?
• 33:29
  SPEAKER_01: But I am a W-2 employee of a bank that works for my career exclusively.
• 33:35
  SPEAKER_01: If it's a crappy deal, I'll tell you to run.
• 33:37
  SPEAKER_01: You know what I mean?
• 33:38
  SPEAKER_01: I don't need the transaction, dude.
• 33:39
  SPEAKER_01: I did 90 million bucks last year.
• 33:40
  SPEAKER_01: I don't need to chase a crappy deal.
• 33:42
  SPEAKER_01: I want to protect you because I want your next one.
• 33:45
  SPEAKER_01: And that and that's the truth.
• 33:46
  SPEAKER_02: And so, I mean, that makes sense to me, right?
• 33:48
  SPEAKER_02: I I get I get the un I don't say uninformed opinion, but I get the other side of the opinions that, hey, there's some kind of kickback, this person's going to get more deals or something from I know I've something from this, but the reality is like am I going to sink an entire company doing crappy deals because I wanted peanuts versus like, hey, I want to make sure that this quality of earnings is solid.
• 34:13
  SPEAKER_02: This is a real company that is really in taking money so that my portfolio stays stout.
• 34:18
  SPEAKER_02: And um, I would assume that most would uh try to push towards that camp.
• 34:24
  SPEAKER_02: There's a good potential, right?
• 34:25
  SPEAKER_01: But before they go, yeah, before we totally move on from that, I just want to share that the reality is that it's not it's not a total first yet.
• 34:34
  SPEAKER_01: And to the people that I fundamentally disagree with today, I see where they're coming from, Jack, right?
• 34:40
  SPEAKER_01: You know what I mean?
• 34:41
  SPEAKER_01: You have to be, you know, whatever.
• 34:43
  SPEAKER_01: Let's not forget that business valuations have always been completed for the benefit of the bank, engaged by the bank, and would still, you know, dictate what we're gonna ultimately lend on.
• 34:56
  SPEAKER_01: You know what I mean?
• 34:57
  SPEAKER_01: Um now that's even further.
• 34:59
  SPEAKER_01: I don't know if you caught that one too.
• 35:00
  SPEAKER_01: If the if the business valuation they do, okay, so listen to this one.
• 35:04
  SPEAKER_01: If the QOE cash, if the QOE cash flow and the business valuation, right, they both need to match the purchase price of the business, not the loan amount.
• 35:16
  SPEAKER_01: Not the loan amount.
• 35:17
  SPEAKER_01: So you can't just say, give me a million bucks for this business.
• 35:20
  SPEAKER_01: I'm gonna borrow a million bucks, the business is only worth 750, rich uncle's gonna kick down a quarter mil, bank exposures.
• 35:28
  SPEAKER_01: No, dude, we can't.
• 35:29
  SPEAKER_01: They're now are not gonna allow you to overpay.
• 35:32
  SPEAKER_01: The only way that you can do that is going to be an adjustment or a seller note on standby, um, or whatever the case may be.
• 35:41
  SPEAKER_01: But there's a way around that too.
• 35:42
  SPEAKER_01: If you want me to really blow your mind with some great strategy, let me know when you're ready for it.
• 35:47
  SPEAKER_01: It doesn't have to be right now.
• 35:49
  SPEAKER_02: Yeah, no, that that that's a different topic.
• 35:51
  SPEAKER_02: Uh, just so that we can get to any of the last ones.
• 35:53
  SPEAKER_02: We'll go into like the idiosyncrasies of like all the strategies behind.
• 35:58
  SPEAKER_01: Uh, and so many, dude.
• 35:59
  SPEAKER_01: I've been thinking about this since it dropped.
• 36:01
  SPEAKER_01: I'm just like, all right, wait a minute.
• 36:02
  SPEAKER_02: But we can always, you know what I mean?
• 36:04
  SPEAKER_02: Yeah, exactly.
• 36:05
  SPEAKER_02: Um no, that's awesome.
• 36:07
  SPEAKER_02: I think those are the big three that I I saw come through.
• 36:09
  SPEAKER_02: Um I don't think it's that big of a change.
• 36:11
  SPEAKER_02: And again, if it's anything, I think at the end of the day, it protects the buyer.
• 36:15
  SPEAKER_02: Uh, and worst case, even if that last one doesn't overly protect the buyer because of some kind of shady dealings with a specific bank, you probably shouldn't be working with that bank.
• 36:24
  SPEAKER_02: You should be working with Alan from Internet Bank in the first place, and then you can avoid all that mess.
• 36:29
  SPEAKER_02: Um, but overall, in the in the long of short like, um I think that all the changes are in the right direction.
• 36:36
  SPEAKER_02: I'm pretty happy with them.
• 36:37
  SPEAKER_02: And and there's some new changes coming down the pike, you said?
• 36:40
  SPEAKER_02: Is that the idea?
• 36:41
  SPEAKER_01: Yeah, I mean, new changes.
• 36:43
  SPEAKER_01: Well, the answer that the rate I think we're gonna see changes in general with how these deals get done, right?
• 36:49
  SPEAKER_01: So the vast majority of Main Street acquisitions are done with SBA financing.
• 36:53
  SPEAKER_01: As I mentioned, you know, earlier.
• 36:55
  SPEAKER_01: That's just the reality of it.
• 36:57
  SPEAKER_01: But what does this mean for folks?
• 37:00
  SPEAKER_01: Ultimately, it's not that different, man.
• 37:02
  SPEAKER_01: The you let me tell you the deals that are actually getting done, the SBA loans that are actually closing, and they're funding, change of ownership is actually happening, are still fundamentally sound and strong.
• 37:15
  SPEAKER_01: The deals that I've been closing, by the way, would close the same way if I had my SBA authorization number October 2nd, 2026.
• 37:23
  SPEAKER_01: Okay, that is the truth.
• 37:25
  SPEAKER_01: It's gonna be based on transferable experience, adjacent experience, direct experience, partnership, personal liquidity, right?
• 37:34
  SPEAKER_01: Do you have any cash left over?
• 37:36
  SPEAKER_01: Yeah.
• 37:36
  SPEAKER_02: Yeah.
• 37:36
  SPEAKER_02: And so most of this, though, is for first-time buyers.
• 37:39
  SPEAKER_02: I know that a lot of our listeners actually already own businesses.
• 37:41
  SPEAKER_02: They probably already have an SBA 7A.
• 37:43
  SPEAKER_02: Did they receive any benefits to the expansion loan?
• 37:47
  SPEAKER_02: Is there any changes about the expansion loan?
• 37:49
  SPEAKER_02: For those quick rundown of the expansion loan is if you already have an SBA loan, you can expand as long as there's the same NAICS code and it's within a reasonable distance.
• 38:00
  SPEAKER_02: There's some there's some fuel, few rules.
• 38:02
  SPEAKER_02: Call Alan about it, but generally you can expand and buy another acquisition to grow your business, which is, in my opinion, one of the biggest generational wealth opportunities of my lifetime.
• 38:13
  SPEAKER_02: Uh specifically because you can also do that deal if you grew your first deal, your first SBA loan, enough, grew enough equity to cover the down payment of the second deal.
• 38:24
  SPEAKER_02: It's a 0% down loan.
• 38:26
  SPEAKER_02: Is that am I I'm not overstating anything?
• 38:29
  SPEAKER_01: Not at all.
• 38:29
  SPEAKER_01: And thankfully, those remain those remain unchanged.
• 38:33
  SPEAKER_01: So though those kind of expansion opportunities are really remarkable.
• 38:37
  SPEAKER_01: Um, you know, that you can buy in the same industry when ownership stays the same.
• 38:43
  SPEAKER_01: Uh they relax the language on defined geography.
• 38:46
  SPEAKER_01: However, most banks still want it to make sense, right?
• 38:48
  SPEAKER_01: Uh, maybe you're buying an outside of your footprint, but it's right, you know, it's within two hours, for example, whatever the case may be.
• 38:55
  SPEAKER_01: Um, but those deals are getting done still, zero down.
• 38:59
  SPEAKER_01: Uh they're easier approvals in a lot of cases, Jack, because your existing business, we're going to look at the combined cash flow.
• 39:05
  SPEAKER_01: The business that you're buying better stand on its own two feet.
• 39:08
  SPEAKER_01: And we'll always talk about that.
• 39:10
  SPEAKER_01: Me and the buyer, we'll we'll strategize.
• 39:11
  SPEAKER_01: We'll say, dude, are you sure you're comfortable with this?
• 39:13
  SPEAKER_01: And they say, Yes, Alan.
• 39:14
  SPEAKER_01: I go, cool.
• 39:14
  SPEAKER_01: I work for you.
• 39:15
  SPEAKER_01: Let's let's keep pumping.
• 39:16
  SPEAKER_01: But you know, I'm not effective unless I'm objective.
• 39:19
  SPEAKER_01: Hey, put that on a t-shirt, right?
• 39:22
  SPEAKER_01: But these guys are able to come in, Jack, with deal one for a million bucks.
• 39:27
  SPEAKER_01: Let's keep using that example, right?
• 39:29
  SPEAKER_01: 50 grand out of pocket.
• 39:31
  SPEAKER_01: They get a seller that understands they're the right person.
• 39:33
  SPEAKER_01: They run the business for two years, okay?
• 39:37
  SPEAKER_01: They're they're doing well with it.
• 39:38
  SPEAKER_01: Everything's good, they got stability, and they're looking for inorganic growth or commercial real estate, right?
• 39:43
  SPEAKER_01: Um, they can do either of those with zero down.
• 39:46
  SPEAKER_01: And that is really, really interesting because now you're buying cash flow and then your EBITA multiple justified in higher levels, as you guys talk about.
• 39:55
  SPEAKER_01: You guys understand that very intimately.
• 39:57
  SPEAKER_01: Your cash on cash return is based on$50,000, Jack.
• 40:01
  SPEAKER_01: I mean, show me.
• 40:01
  SPEAKER_01: I mean, yes, there's a PG.
• 40:03
  SPEAKER_01: Yes, it can, you know, yes, there's more hoops in some cases.
• 40:07
  SPEAKER_01: SBA does not have to be a four-letter word.
• 40:09
  SPEAKER_01: And if you know what you're doing and you're working with somebody who is in the trenches that you are learning, you can do you can think about that.
• 40:17
  SPEAKER_01: I mean, you can get a crazy exit.
• 40:19
  SPEAKER_01: Well, buy and hold, put your kids in a better school than you went to, right?
• 40:23
  SPEAKER_01: For 50 grand?
• 40:24
  SPEAKER_01: Come on, dude.
• 40:25
  SPEAKER_01: Come on.
• 40:25
  SPEAKER_01: And then they have to preserve the program.
• 40:27
  SPEAKER_01: That's why the rules might have to adjust to make sure that crappy deals aren't going to get done and tank this thing.
• 40:34
  SPEAKER_01: You know, that's the truth.
• 40:35
  SPEAKER_01: It's no tax dollars come in the SBA 7A loan program.
• 40:38
  SPEAKER_01: That's where there's a guarantee fee.
• 40:40
  SPEAKER_01: Like, so it's it's still a great place when you're doing it the right way.
• 40:46
  SPEAKER_02: And that's the key.
• 40:47
  SPEAKER_02: It's you have to buy right, you have to be there is a lot of risk, and I don't want to over undersell that.
• 40:53
  SPEAKER_02: No.
• 40:54
  SPEAKER_02: It is a risky option, but at the end of the day, uh it the for me, I mean, I'm an SBA 7A user.
• 41:00
  SPEAKER_02: I'm a great example of somebody who has successfully used it and exited out of the SBA loan.
• 41:05
  SPEAKER_02: It is a wonderful opportunity for everybody out there.
• 41:08
  SPEAKER_02: And the expansion loan is a wonderful opportunity.
• 41:11
  SPEAKER_02: I mean, it is a wonderful program overall.
• 41:13
  SPEAKER_02: Yeah.
• 41:14
  SPEAKER_02: That uh has it's changed many of my friends' lives that I know now that I'm in the industry with people who own HVAC companies and plumbing companies and electrical companies, and almost all of them bought it in some level of SBA 7A.
• 41:26
  SPEAKER_02: And um most, I don't think everyone except one, I know of one default out of like hundreds of connections.
• 41:34
  SPEAKER_02: So yeah.
• 41:35
  SPEAKER_02: Um sweet, Alan.
• 41:38
  SPEAKER_02: Dude, anything else?
• 41:39
  SPEAKER_01: Yeah, I mean, I would just I would tell you this, okay?
• 41:42
  SPEAKER_01: So with the rules, okay, this is a little bit of game here, right?
• 41:47
  SPEAKER_01: For the listeners.
• 41:47
  SPEAKER_01: And we can and I you know would love to I'd spot I'd talk even more detail.
• 41:52
  SPEAKER_01: But Alan F I B, book a call.
• 41:55
  SPEAKER_01: We'll talk about it.
• 41:56
  SPEAKER_01: I don't care where you are in the process.
• 41:57
  SPEAKER_01: Alan Fib.com, Alan Peterson S A.
• 42:00
  SPEAKER_02: One L A L N A N A-L-A-N-F-I-B.com.
• 42:05
  SPEAKER_02: It'll be below link so that you guys can just click on it if you're on YouTube or wherever you listen.
• 42:10
  SPEAKER_02: But Alan Fib.com, it's Alan, just so we're gonna do the pitch now.
• 42:14
  SPEAKER_02: It is a it's a free resource for them to use, book a calendar link with you, discuss, get get pre-qualified as a buyer, which it's different from a pre-qualified business, right?
• 42:25
  SPEAKER_02: There's two different things.
• 42:26
  SPEAKER_02: Pre-qualified businesses are usually bullshit.
• 42:28
  SPEAKER_02: Being pre-qualified by a bank is an awesome tool to use with a seller to show that, hey, you have the funds, you have the uh proof of income statements, the proof of finance statements.
• 42:39
  SPEAKER_02: Uh so it's a really important thing to do at some point in your journey to buying your first business.
• 42:43
  SPEAKER_02: Talk to Alan, he'll give you that for free, walk you through a bunch of businesses and what he thinks if you have a deal already on the table.
• 42:49
  SPEAKER_01: Yeah, and I have some I have some cheat sheets and stuff like that to help folks.
• 42:52
  SPEAKER_01: And, you know, but also it's nice if if if helpful, I also have been known to make introductions to brokers that I know and who trust me, right?
• 43:02
  SPEAKER_01: So I can say, hi, Ms.
• 43:04
  SPEAKER_01: Broker, Mr.
• 43:05
  SPEAKER_01: Broker, you know, please meet uh my pre-qualified client.
• 43:09
  SPEAKER_01: I'm working with them, they're looking for a business that is uh uh X, Y, Z.
• 43:14
  SPEAKER_01: We'd love to be on your radar if that comes around.
• 43:16
  SPEAKER_01: All of a sudden, do you think the broker wants to deal with biz by sell?
• 43:18
  SPEAKER_01: You think the buyers are sick of biz by sell, brother?
• 43:21
  SPEAKER_01: The brokers that's why we're like that.
• 43:23
  SPEAKER_01: No shade to my broker friends.
• 43:25
  SPEAKER_01: They don't want to make it for everyone listening.
• 43:28
  SPEAKER_02: Alan was one of the keynote speakers at the IBBA, the International Business Brokers Association.
• 43:35
  SPEAKER_02: So he does know a few brokers, by the way.
• 43:39
  SPEAKER_02: A few brokers.
• 43:40
  SPEAKER_01: They're my friends, and and and but they all like that.
• 43:43
  SPEAKER_01: And it's because if you had a thousand, you know, you you want to talk about HVAC deal for there might actually be 500 NDAs sold assigned, excuse me.
• 43:53
  SPEAKER_01: And of those, there's gonna be a whole lot of offers that are okay, one million bucks.
• 43:57
  SPEAKER_01: Here's my offering.
• 43:58
  SPEAKER_01: 400,000.
• 44:00
  SPEAKER_01: Worth 100% seller finance.
• 44:02
  SPEAKER_01: Next.
• 44:03
  SPEAKER_01: Or you get a banker that does this and knows that understands this that you've done deals with before.
• 44:09
  SPEAKER_01: Hey, do you have a listing for my buyer here?
• 44:13
  SPEAKER_01: Because here's a document with my signature that says I'll lend them three million bucks if you do.
• 44:18
  SPEAKER_01: Right.
• 44:19
  SPEAKER_01: And the the numbers have to work, of course.
• 44:21
  SPEAKER_01: Let's not forget.
• 44:22
  SPEAKER_01: But the brokers I know are they live on a place called Planet Earth with their pricing as well.
• 44:27
  SPEAKER_01: So we're off market, show a seller, you're good to go.
• 44:29
  SPEAKER_01: Anyway, that's the pitch on the pre-qualification and why it matters.
• 44:33
  SPEAKER_01: When we're talking about this quality of earnings dictating the total valuation, when we're talking about, well, what are we going to do if I offered I offered$4 million and the valuation came in at$3.5 million?
• 44:49
  SPEAKER_01: Now we've got to deal with a retrade, and it's the bank's fault, and this quality of earnings provider that I picked, but you engaged, uh, here's good whatever, here's good beta.
• 44:59
  SPEAKER_01: Okay.
• 45:00
  SPEAKER_01: Maybe consult attorney.
• 45:02
  SPEAKER_01: I know a lot of good ones for that too.
• 45:03
  SPEAKER_01: I know they read a lot of the same buttons checked, but the reality is talk to an attorney and not an attorney.
• 45:08
  SPEAKER_01: Here's my asterisk, okay?
• 45:10
  SPEAKER_01: But what if we did this?
• 45:12
  SPEAKER_01: My offer is four million dollars, which represents multiple of IBITA, right?
• 45:20
  SPEAKER_01: Or SDE, or however you want to dress it up, the number which is representing this multiple should be verified by financial due diligence and bank underwriting.
• 45:34
  SPEAKER_01: The multiple stays the same, right?
• 45:38
  SPEAKER_01: But the purchase price is not.
• 45:41
  SPEAKER_01: It changes, you know.
• 45:42
  SPEAKER_01: The price is floating here, but the multiple is not.
• 45:46
  SPEAKER_01: So the seller goes, Well, my numbers are real, my books are solid as heck.
• 45:50
  SPEAKER_01: I got a great, then we got no problems, right?
• 45:52
  SPEAKER_01: There's no retrade, it's an adjustment.
• 45:56
  SPEAKER_01: Maybe you want to put it in wording, and we'll pay you three million bucks or whatever, four million bucks, which represents whatever, and we will pay less if financial due diligence are made under and come short that way.
• 46:09
  SPEAKER_01: I don't know, man.
• 46:10
  SPEAKER_01: Maybe it comes up with six million bucks, you're still in the business.
• 46:12
  SPEAKER_01: Maybe you want to keep that to yourselves, not an attorney.
• 46:15
  SPEAKER_01: Look into that.
• 46:15
  SPEAKER_01: But that's that's a little bit of game there.
• 46:17
  SPEAKER_02: But this is this is for everyone listening.
• 46:20
  SPEAKER_02: This is why you use Alan because he's always thinking about this, and this this industry is as uh somewhat fluid in how you can um yeah, how you can work.
• 46:32
  SPEAKER_00: One of the hardest transitions for any home service business owner is moving from running jobs to running a business.
• 46:39
  SPEAKER_00: At some point, the whiteboard or the spreadsheet or that group text that you guys are doing just stops working and things start falling through the cracks.
• 46:46
  SPEAKER_00: The office is gonna lose visibility into the field, and you become the bottleneck for basically everything.
• 46:52
  SPEAKER_00: That's one of the reasons that I like Field Pulse a lot.
• 46:54
  SPEAKER_00: Field Pulse gives growing home service companies one place to manage scheduling, dispatching, estimates, invoicing, job tracking, customer communication, and reporting.
• 47:03
  SPEAKER_00: It has the tools you actually need to run and grow your business without the complexity of a bloated enterprise software that your team's just not going to use.
• 47:11
  SPEAKER_00: It's powerful enough to scale with your business, but simple enough that your team will actually adopt it.
• 47:15
  SPEAKER_00: If you've outgrown the whiteboard and you're ready to build some better systems, check out Field Pulse using the link below.
• 47:20
  SPEAKER_00: For a limited time, they're offering 20% off your base subscription plus 50% off premium support for your first year.
• 47:28
  SPEAKER_02: Always the best uh getting to talk to you.
• 47:31
  SPEAKER_02: Um, always the best having you on.
• 47:33
  SPEAKER_02: We love these episodes.
• 47:35
  SPEAKER_02: Any final thoughts for the audience?
• 47:37
  SPEAKER_01: No, just um, you know, I really if there's I move quickly, I talk too quickly.
• 47:43
  SPEAKER_01: There may have been some nuance um that you're curious about, you're interested about, even if you're not positive that buying a business makes sense for you, or if you're under LOI and you need to move quickly, any of those calls are my favorite calls because I love what I do, I love this space.
• 48:00
  SPEAKER_01: Uh, I've been blessed to work with so many awesome folks in these trades.
• 48:03
  SPEAKER_01: I I listen, I'm no expert, but I'll tell you what, I I know where a lot of these landmines are, and I can point you in the direction of some really smart people that can help in different ways too.
• 48:13
  SPEAKER_01: Um, so if anybody's interested, shoot me a message, figure it out.
• 48:17
  SPEAKER_01: We'll we can talk through anything.
• 48:19
  SPEAKER_01: And I'm excited to be here with you, Jack.
• 48:22
  SPEAKER_01: And listen, my feelings were hurt when electrical guys didn't want my money, but I got an SOP update, baby.
• 48:29
  SPEAKER_01: People can use me again.
• 48:30
  SPEAKER_01: So anything you need, Jack, let me know.
• 48:32
  SPEAKER_01: And I'm grateful to be here with you.
• 48:34
  SPEAKER_01: Um, and and for all the the opportunity just to talk about this stuff.
• 48:37
  SPEAKER_01: So I look forward to next time very much.
• 48:39
  SPEAKER_02: Awesome.
• 48:39
  SPEAKER_02: Well, if you like what you heard, leave uh don't even leave comments below.
• 48:43
  SPEAKER_02: Just call Alan.
• 48:44
  SPEAKER_02: He'll answer those comments because I will probably not unless it's an electrical comment.
• 48:49
  SPEAKER_02: And uh go ahead, like, subscribe, share, just all the great things, and uh we'll see you next time.
• 48:53
  SPEAKER_02: Thanks, guys.
• 48:54
  SPEAKER_02: Thanks, Alan.