Biz Brokers Predict Credit Tightening For Rest of Year
Businesses in search of funding will have a difficult time finding it the rest of the year, new research suggests.
A recent study found that most business brokers are pessimistic regarding the availability of financing in 2012. Nearly 70 percent believe access to funding has not improved since last year.
More than 70 percent of brokers expect no change in funding availability through the rest of the year, while another 19 percent believe financing availability will be even tighter the next few months.
Curtis Kroeker, general manager of BizBuySell.com, which conducted the research, said buyers are ready to buy and sellers are ready to sell, but without third-party financing help, they are being forced to find new ways to piece together deals.
"Of course, sometimes they can’t find a solution and, as a result, some good deals aren’t getting done," Kroeker said.
The study shows banks take the most blame for the lack of available financing. More than half the brokers surveyed said conditions aren’t improving because of the stringent lending policies banks continue to have in place.
While the government has tried to improve conditions for businesses, the research revealed that more than 40 percent of business brokers think the efforts haven't made a difference. In addition, 36 percent think the loan process has become more difficult since 2011.
Business owners interested in selling their business have been forced into offering seller financing as a way of enticing prospective buyers. Nearly 50 percent of brokers said seller financing is an essential part of speeding up the business sale process.
"Business owners starting to plan their exit strategy should expect that seller financing will be a required part of the sale," Kroeker said. "We've seen the business-for-sale market slowly improving over the past few years and business owners' willingness to finance is a big reason why more deals have been able to close."
With the upcoming presidential election causing uncertainty in who will be running the country, the research shows business brokers feel it will take quite awhile for the business transaction environment improve. Forty percent of brokers expect it to take more than two years before business transaction volumes return to pre-recession levels, while nearly 15 percent feel it will never return to pre-recession levels.
The researched was based on surveys of 260 business brokers throughout the U.S.