Showing posts with label #BusinessAcquisition. Show all posts
Showing posts with label #BusinessAcquisition. Show all posts

Monday, October 19, 2026

Terrified of losing your job? Buying a business might be the wrong move

Afraid of Losing Your Job? Should You Buy a Business Instead?

Imagine you're 50 years old, earning $150,000 a year, with a mortgage, car payments, retirement savings, and a family depending on your income.

You've spent years building your career. You've worked hard, developed valuable skills, and created a comfortable lifestyle.

But lately, something has changed.

Your company is talking about restructuring. Artificial intelligence is changing how work gets done. The economy feels uncertain, and you're hearing more stories about experienced professionals struggling to find new jobs after being laid off.

Suddenly, the income you've relied on for decades doesn't feel quite as secure.

So you start thinking about alternatives.

What if you bought a business?

Instead of depending on an employer, you could become your own boss. You could control your future, make your own decisions, and potentially build an asset that provides income for years.

It sounds appealing.

But here's something I want you to understand before you start searching for businesses for sale.

Being afraid of losing your job is a terrible reason, by itself, to buy a business.

That doesn't mean buying a business is a bad idea.

I'm a big advocate of acquiring existing, profitable companies. I've spent years helping people understand how to do it while controlling risk.

But there's a significant difference between making a deliberate decision to become an entrepreneur and buying a business because you're frightened about your financial future.

Let's explore why job insecurity is making business ownership more attractive, what changes when you become an owner, and how to determine whether acquiring a business is actually the right decision for you.



Why More Professionals Are Worried About Losing Their Jobs

Job insecurity isn't limited to people who are currently unemployed.

Many people with established careers and relatively high incomes are becoming concerned about whether their earnings will continue.

And the statistics help explain why.

According to research I discussed in the original video, 42% of American adults identified finding and keeping a job as a financial concern, compared with 37% the previous year.

That's a five-percentage-point increase.

In Canada, the labor market has also created concerns.

Figures cited for August 2026 showed an unemployment rate of 6.4%, while approximately 24% of unemployed people had been without work for more than 27 weeks.

Think about what that means for someone accustomed to earning a six-figure salary.

If you suddenly lose your job, how long will it take to find another position that pays a comparable amount?

Three months?

Six months?

A year?

That's the problem many professionals are worried about.

It's not simply the possibility of becoming unemployed.

It's the risk of being unable to replace their previous income quickly enough to maintain their financial obligations.

The Hidden Danger of High-Income Employment

Someone earning $150,000 annually may have a very comfortable lifestyle.

But that lifestyle often comes with substantial financial commitments.

They may have:

  • A large mortgage

  • Vehicle payments

  • Children approaching university age

  • Retirement savings contributions

  • Insurance and household expenses

  • Other ongoing financial obligations

These commitments are manageable while the salary continues.

But what happens if that salary disappears?

Unemployment benefits may replace only a fraction of the previous income.

And finding another position with similar compensation can take time.

The higher your fixed expenses, the more serious that interruption can become.

AI, Tariffs, and Economic Uncertainty Are Adding Pressure

There are several reasons people are becoming concerned about their employment.

Some industries face uncertainty related to international trade and tariffs.

Others are experiencing changes caused by artificial intelligence.

Workers whose responsibilities involve tasks that AI systems may eventually perform are understandably wondering how their jobs will change.

In Canada, an Ipsos-RBC survey cited in the video found that only 42% of working Canadians rated their financial health as good or excellent.

Overall worker well-being reportedly declined from 65% in 2025 to 56% in 2026.

That's a significant change in sentiment.

But there's an important distinction.

These surveys measure people's perceptions and concerns.

They don't necessarily predict what will happen in the labor market.

Someone who believes jobs will become harder to find isn't automatically correct.

Nevertheless, widespread anxiety can influence financial decisions.

And that's where the idea of buying a business starts becoming attractive.

The Mortgage Problem: What Happens When Higher Payments Meet Job Loss?

For Canadian homeowners, mortgage renewals create another source of financial uncertainty.

Unlike many American mortgages, which commonly have fixed rates for 15 or 30 years, Canadian mortgages frequently have shorter terms.

Five-year mortgage terms are common.

At renewal, borrowers may face different interest rates.

The figures discussed in the video suggested that approximately 12% of Canadian mortgages would renew during 2026 from unusually low pandemic-era rates.

Some homeowners could experience payment increases of approximately 15%.

Now, a higher mortgage payment might be manageable if your salary remains stable.

But combine that increase with unemployment, and the situation changes dramatically.

You might need to use savings to cover your expenses.

You might have to reduce retirement contributions.

And if the financial pressure becomes severe, you may consider selling your home.

That's particularly difficult if property values have fallen from their previous peaks.

The larger point is that people are facing several financial uncertainties simultaneously.

And when those concerns accumulate, it's natural to start looking for ways to regain control.

The Employment Concentration Risk Nobody Talks About

Here's an analogy I like to use.

Imagine visiting a financial advisor and explaining that your entire retirement portfolio consists of one stock.

What would the advisor say?

They would probably suggest diversification.

Why?

Because if that one investment performs poorly, your entire retirement plan could be affected.

Now consider the typical household.

Many families depend on one or two salaries.

Those salaries pay for the mortgage, groceries, vehicles, retirement savings, and everything else.

In other words, their household income may be concentrated in one or two sources.

If one disappears, the consequences can be substantial.

Can Owning a Business Reduce Income Concentration Risk?

When I worked at Yellow Pages, I regularly spoke with people who owned businesses or were preparing to start them.

One idea I often discussed was that business ownership could, under the right circumstances, provide a more diversified source of revenue than employment.

Think about a business serving hundreds of customers.

Instead of depending on one employer to provide your entire income, the business generates revenue from many customers.

If one customer leaves, the others may continue purchasing.

That can create a different kind of financial resilience.

But be careful.

Not every business has a diversified customer base.

Some companies depend heavily on one or two major customers.

Others rely on a single supplier, key employee, or industry.

And a business can lose many customers simultaneously during an economic downturn.

Owning a business doesn't automatically eliminate income concentration risk. It changes the nature of that risk.

That's an important distinction.

Employment vs. Business Ownership: You're Trading One Set of Risks for Another

Let's compare the two situations.

As an employee, you generally have a defined role.

You perform your responsibilities and receive a salary or wage.

Your employer makes the major strategic decisions.

You may have some influence, but ultimately you're working within someone else's organization.

As a business owner, things change.

You gain decision-making authority.

But you also inherit responsibility for the company's performance.

Here's how the risks compare.

EmploymentBusiness ownership
Generally more predictable wages or salaryIncome may fluctuate with business performance
Employer makes major strategic decisionsOwner makes the final business decisions
Responsibilities are often specializedOwner may oversee sales, staffing, operations, and finance
Job can be eliminated during a downturnBusiness can lose customers or become unprofitable
Limited control over company directionGreater control, but greater responsibility
Employer usually provides operating capitalOwner must manage working capital and financing

Neither situation is automatically better.

The question is which set of responsibilities and uncertainties suits you.

Control Comes With Responsibility

When you become a business owner, you're responsible for decisions that may have previously belonged to several different departments.

What happens if sales decline?

What if a key employee quits?

What if your largest customer stops buying?

What if the business needs new equipment?

What if cash flow becomes tight and payroll is due on Friday?

Those problems are now yours.

You may have advisors, managers, and employees who can help.

But ultimately, you're responsible for ensuring the company survives.

So before deciding that business ownership is safer than employment, ask yourself whether you're prepared for those responsibilities.

Why Buying an Existing Business Can Be Better Than Starting One

If you decide entrepreneurship is genuinely attractive, you have two broad options.

You can start a business.

Or you can buy an existing one.

Starting a company requires you to discover what customers want, develop an offering, establish pricing, attract customers, and build operating systems.

You also need to figure out how much everything will cost.

And you may spend considerable time before the company becomes profitable.

Buying an established business can eliminate some of that startup uncertainty.

You may acquire:

  • Existing customers and revenue

  • Employees with operating experience

  • Supplier relationships

  • Equipment and facilities

  • Established processes

  • Historical financial information

  • A reputation in the marketplace

These can be valuable advantages.

You aren't necessarily starting from zero.

But that doesn't mean the acquisition is automatically safer.

Buying a Business Doesn't Eliminate Entrepreneurial Risk

An established business can still have serious problems.

Its customers may be leaving.

Its equipment may need replacement.

Its financial statements may not reflect the actual cash required to operate.

The seller may be performing responsibilities that the buyer doesn't know how to handle.

Or the purchase price may be so high that the company cannot support the acquisition financing.

That's why I teach people to evaluate acquisitions carefully.

Buying an existing business can reduce certain startup risks.

But you still need to understand what you're buying and whether the financial structure makes sense.

The Three Types of Business Buyers I See

Over the years, I've worked with many people who want to acquire small businesses.

I've noticed three broad approaches to risk.

Understanding which one describes you can help determine whether business ownership is a suitable path.

Type 1: The Paralyzed Buyer

The first type is someone who needs complete certainty.

They want every question answered.

Every risk eliminated.

Every possible outcome predicted.

But that's not how business ownership works.

Entrepreneurs regularly make decisions without perfect information.

You can investigate a business thoroughly.

You can examine financial statements, interview employees, review customer contracts, and consult professional advisors.

But you'll never eliminate every unknown.

If uncertainty prevents you from making any decision, you may discover that you like the idea of owning a business more than the reality.

Type 2: The Agency-Driven Buyer

This is the buyer who investigates opportunities seriously but remains willing to walk away.

They examine a business.

They discover a significant problem.

And they decide not to proceed.

Some people might consider that a failed acquisition attempt.

I disagree.

Walking away from a bad opportunity can demonstrate good entrepreneurial judgment.

The buyer has exercised control over the decision.

They've used the information available and concluded that the risk isn't acceptable.

This is the kind of discipline I encourage.

A successful acquisition search doesn't require you to buy the first company you investigate.

It requires you to find an opportunity that fits your goals, capabilities, and financial circumstances.

Type 3: The Fatalistic Buyer

This is the buyer who sees unresolved risks and assumes everything will somehow work out.

They may be desperate to leave employment.

They may be worried about losing their job.

Or they may have already been laid off and feel pressure to establish a new income.

They find a business that looks promising.

Then they start making the numbers fit.

Sales will increase.

Expenses will decline.

Employees will stay.

Customers won't leave.

Financing will work.

And the owner will earn enough money to maintain their lifestyle.

But what if all those things need to happen perfectly for the deal to succeed?

That's not a realistic margin of safety.

That's gambling.

Why Every Acquisition Needs a Margin of Safety

A business acquisition should be able to withstand some unexpected problems.

Perhaps sales decline temporarily.

Maybe an employee leaves.

Equipment breaks down.

A customer delays payment.

Or expenses increase.

If your financial forecast only works when everything goes exactly according to plan, you're taking an enormous risk.

A sensible acquisition should have enough financial flexibility to absorb reasonable setbacks.

That's one reason finding the right business can take a long time.

Should You Quit Your Job to Search for a Business?

If you're currently employed and considering an acquisition, my advice is straightforward.

Don't quit your job just because you've decided to investigate business ownership.

Your salary gives you an important advantage.

It provides income while you learn.

It allows you to save money.

And it reduces the pressure to complete a transaction quickly.

You can use this period to develop the knowledge required to make an informed decision.

What to Learn Before Buying a Business

Start by understanding the fundamentals of business acquisitions.

Learn how companies are valued.

Understand seller's discretionary earnings and EBITDA.

Study working capital.

Learn how acquisition financing works.

Understand the difference between accounting profit and cash flow.

And become familiar with the due diligence process.

You should also begin identifying industries that interest you.

Talk to lenders.

Examine actual businesses for sale.

And determine how much money you could realistically invest.

The goal isn't to convince yourself that buying a business is the answer.

The goal is to determine whether it's a viable option.

Why You Need to Save Capital Before Buying

Here's something else I want to emphasize.

If you're earning a strong salary but spending nearly all of it, you need to reconsider your financial priorities before attempting an acquisition.

Buying a business requires capital.

You may need money for a down payment.

You may need to cover professional fees.

You may need additional working capital after closing.

And you should have personal financial reserves.

The idea that anyone can buy a profitable business with no money is not a realistic foundation for an acquisition strategy.

There may be creative financing opportunities.

But that doesn't eliminate the need for financial resources or the ability to absorb risk.

If business ownership is your goal, start preparing financially while you're still employed.

What If You've Already Lost Your Job?

This is where the situation becomes particularly dangerous.

Imagine you've just been laid off.

You receive severance.

Perhaps you also have retirement savings.

You start searching for new employment, but the process is taking longer than expected.

Meanwhile, you discover websites advertising businesses for sale.

Some listings promise substantial owner earnings.

Others describe opportunities that appear to replace your former salary.

Suddenly, buying a business looks like a solution.

But there's a problem.

You're operating under financial pressure.

The Dangerous Combination of Severance Money and Acquisition Urgency

You have money available.

You need income.

And you feel that time is running out.

That combination can create a powerful incentive to rush into an acquisition.

You may begin ignoring warning signs because you want the transaction to work.

You might accept optimistic financial projections.

You might overlook customer concentration.

Or you might convince yourself that you'll solve operational problems after closing.

This is how people end up making expensive mistakes.

Don't turn job-loss anxiety into acquisition compulsion.

A business acquisition should be a deliberate investment decision, not a desperate attempt to replace your paycheck.

Four Paths to Consider After a Layoff

If you've already lost your job and are interested in entrepreneurship, I recommend exploring several possibilities simultaneously.

1. Continue Searching for Employment

A new job can provide the income you need while you evaluate your longer-term options.

Even if your ultimate goal is business ownership, employment can reduce immediate financial pressure.

And removing that pressure may help you make better decisions.

2. Explore Consulting Opportunities

If you've spent years developing specialized knowledge, other companies may benefit from your experience.

Think about the problems you know how to solve.

Who else has those problems?

What would solving them be worth?

You might be able to generate income through consulting or contract work.

LinkedIn can be a useful place to reconnect with people in your industry and identify potential clients.

3. Consider Starting a Small Business

Perhaps you've identified a problem in the market that you understand particularly well.

You may be able to create a service or product around your expertise.

Starting a business has its own risks.

But depending on the opportunity, it may require less upfront capital than purchasing an established company.

4. Continue Investigating Acquisitions

You can still look for businesses to buy.

But don't make completing an acquisition the only acceptable outcome.

Evaluate opportunities carefully.

Learn from the process.

And remain willing to walk away.

Your success shouldn't be measured by whether you sign a purchase agreement.

It should be measured by whether you're making decisions that improve your long-term financial position.

Why a Business Search Can Take Years

Here's something many first-time buyers underestimate.

Finding a suitable business can take a considerable amount of time.

I've worked with people who spent years searching for the right opportunity.

That doesn't necessarily mean they were doing something wrong.

They may have rejected businesses that were overpriced.

They may have discovered financial problems during due diligence.

Or they may have struggled to find a company that matched their experience, geographic preferences, and available capital.

That's part of the process.

Now imagine trying to complete that search while your severance money is running out.

You may feel increasingly compelled to accept an opportunity that isn't right for you.

That's why relying on an acquisition to solve an immediate income problem can be dangerous.

Maybe You're Better Suited to Employment—and That's Fine

Not everyone needs to become a business owner.

Some people genuinely enjoy specializing in a particular field.

They like becoming highly skilled at their work.

They prefer focusing on a defined set of responsibilities rather than managing an entire organization.

There's nothing wrong with that.

If this describes you, the better response to job insecurity may be to improve your employability.

How to Make Yourself More Valuable in an AI-Driven Workplace

If you're worried that artificial intelligence could affect your job, start learning how to use it.

Understand which tasks AI can perform.

Learn how to integrate those tools into your work.

Develop skills that make you more productive.

Instead of simply worrying about automation, position yourself as someone who knows how to work effectively with the technology.

Continue reading.

Learn new skills.

Stay informed about changes in your industry.

And build professional relationships.

If you genuinely prefer employment, becoming a more capable and adaptable employee may be a better strategy than purchasing a business you don't really want to operate.

Talk to Real Business Owners Before Making the Leap

One of the most practical things you can do is speak with people who already own businesses.

Not just successful entrepreneurs giving presentations about financial freedom.

I mean ordinary business owners dealing with the daily realities of operating a company.

Make a list of people you know who own businesses.

Invite them to lunch or coffee.

Ask them what their days actually look like.

Find out what problems they dealt with last week.

Ask about difficult customers.

Employee problems.

Cash flow challenges.

Unexpected expenses.

And the decisions they wish they'd handled differently.

You want an accurate picture of entrepreneurship.

The Consulting Business Reality Check

I sometimes speak with people who want to start consulting businesses.

They're experts in their field.

They enjoy helping clients.

And they imagine spending most of their time providing consulting services.

But then they discover something surprising.

A substantial portion of their time may be devoted to marketing and sales.

They need to find clients.

Prepare proposals.

Follow up with prospects.

Manage invoicing.

And maintain relationships.

The actual consulting work may represent only a fraction of their schedule.

In the video, I used an illustrative example of spending 20% of the time consulting and 80% on marketing and sales.

The exact proportions vary by business.

But the lesson is important.

Being good at delivering a service isn't the same thing as being prepared to operate a business that sells that service.

You need to understand both sides before committing.

How to Decide Whether Business Ownership Fits Your Strengths

At the end of the day, I believe people are more likely to succeed when they understand their natural abilities and build their careers around them.

Some people are excellent specialists.

They enjoy developing deep expertise.

They thrive when they can focus on a particular responsibility.

Others are comfortable dealing with uncertainty.

They enjoy making decisions.

They can manage competing priorities and accept responsibility for outcomes.

Neither personality is inherently superior.

But they may be suited to different careers.

Before buying a business, ask yourself:

  1. Do I genuinely want to operate a company, or do I simply want more income security?

  2. Am I comfortable making important decisions without perfect information?

  3. Can I manage employees, customers, suppliers, and financial obligations?

  4. Do I have enough capital to purchase a business and withstand setbacks?

  5. Am I willing to spend months or years finding the right opportunity?

  6. Would I still want to own a business if my current job were completely secure?

  7. Am I prepared to walk away from an acquisition that doesn't make financial sense?

That sixth question is especially revealing.

If your job suddenly became completely secure, would you still want to become an entrepreneur?

If the answer is no, then fear may be driving your interest more than genuine entrepreneurial ambition.

That's something worth thinking about.

When Deciding Not to Buy a Business Is a Success

I've had people go through my Business Buyer Advantage training and later tell me they learned something important.

They discovered that business ownership wasn't right for them.

And I consider that a successful outcome.

Why?

Because they invested in education, examined the realities of entrepreneurship, and made an informed decision before risking their savings.

They didn't need to purchase a company to prove that the learning process was valuable.

Sometimes the best acquisition decision is deciding not to acquire anything.

The purpose of learning about business buying isn't to pressure yourself into completing a deal.

It's to understand the opportunities and risks well enough to decide what makes sense for your circumstances.

Final Thoughts: Don't Let Fear Make Your Investment Decisions

Job insecurity is a legitimate concern.

If you've spent years building a career and supporting a family, the possibility of losing your income can be frightening.

And with changes in technology, economic uncertainty, and pressure on household finances, it's understandable that more people are looking for alternatives.

Buying a business may be one of those alternatives.

But it isn't a guaranteed solution.

You exchange the risks of employment for the responsibilities of ownership.

You gain control over important decisions.

But you also become responsible for sales, employees, financing, cash flow, and the company's future.

If you genuinely want that responsibility, business ownership may be worth exploring.

If you're still employed, use your salary to build capital and develop your acquisition skills.

If you've already been laid off, pursue multiple income opportunities rather than treating a business purchase as your only path forward.

And regardless of your situation, don't allow fear or urgency to push you into a transaction that doesn't make financial sense.

Your goal isn't to buy a business as quickly as possible. Your goal is to determine whether buying a business can help you build a better future without taking unreasonable risks.

Sometimes that means making an acquisition.

Sometimes it means remaining employed while developing new skills.

And sometimes it means deciding that entrepreneurship simply isn't the right path.

The important thing is making that decision deliberately.

Learn How to Buy a Business While Controlling Risk

If you're seriously considering business ownership and want to understand the realities of buying an existing company, my Business Buyer Advantage program is designed to help.

Through online training, group coaching, and consulting services, I teach people how to evaluate businesses, understand valuations, analyze cash flow, explore financing options, and manage acquisition risks.

The goal isn't to convince you to buy something.

It's to help you understand whether buying a business is the right decision for you—and how to approach the process intelligently if you decide to proceed.

Explore Business Buyer Advantage 

Monday, September 21, 2026

True Story Buy a Biz $1 sell for $50M! The Poundland reality

 

A Business Bought for £1 Could Sell for £50 Million—Here's the Catch

Imagine buying an entire retail chain for just £1.

Now imagine hearing that the same business could be sold for nearly £50 million.

Sounds like the ultimate business acquisition success story, doesn't it?

But there's a major detail missing from that headline.

I recently came across a story shared by Clinton Lee, who wrote the foreword to my book Business and Asset Values. It involved Poundland, a struggling British discount retail chain acquired by turnaround specialists Gordon Brothers for a nominal £1.

At the time I reviewed the story, there were reports of a potential £50 million sale, but I couldn't find confirmation that such a transaction had actually happened.

What interested me wasn't the potential resale price.

It was the enormous difference between paying £1 to acquire a business and having enough money to actually operate it.

And that's a lesson every small business buyer needs to understand.


The Reality Behind Poundland's £1 Acquisition

Poundland is a British discount retailer, somewhat comparable to Dollar General in the United States or Dollarama in Canada.

When Gordon Brothers acquired the struggling chain, the nominal purchase price was just £1.

That sounds incredible until you understand what the buyers were taking on.

Poundland was losing money and required substantial restructuring. Gordon Brothers, a specialist turnaround firm, needed considerable additional financing to support operations while implementing changes.

The buyers initially announced plans for up to £80 million in financing, with the working capital facility eventually increasing to £95 million.

As I explained:

"The headline is not false. It is it's just incomplete." —David C. Barnett

The £1 represented the nominal price paid for the shares.

It didn't represent the total financial commitment required to take control of the company and attempt to make it profitable.

The buyers also faced difficult decisions involving store closures, staffing reductions, and other restructuring expenses.

This wasn't a business someone could realistically acquire and operate with a single pound in their pocket.

Purchase Price vs. Total Project Cost

One of the concepts I consistently teach business buyers is the importance of understanding the total project cost.

The amount you pay the seller is only one component of the investment.

You may also need money for inventory, working capital, equipment, operating losses, and other expenses required to keep the business functioning.

As I explained in the video:

"The purchase price of the shares and the amount of capital required to own and operate the company are two entirely different numbers." —David C. Barnett

Poundland is a large-scale example of this principle.

But the same problem appears in small business acquisitions every day.

A $1 Business That Needs $800,000 to Operate

Let's bring this down to a typical Main Street business.

Imagine a distribution company generating $2.5 million in annual sales and approximately $150,000 in Seller's Discretionary Earnings (SDE).

Suppose comparable businesses are valued at around 2.2 times SDE.

That suggests an operating business value of approximately $330,000.

Even at three times SDE, the value would be around $450,000.

Now imagine the seller agrees to sell you the business for just $1.

It sounds like you've found an extraordinary bargain.

But there's a problem.

The Missing Inventory

The company normally requires approximately $300,000 in inventory to satisfy customer demand.

However, by closing day, the seller has reduced inventory to just $100,000.

You're receiving that remaining inventory for practically nothing.

But the business is now missing $200,000 in inventory required to operate at its normal level.

If you want to continue satisfying customers, you'll need to replace that missing stock.

The Missing Accounts Receivable

Suppose the seller also keeps all existing accounts receivable because those sales occurred before closing.

The business normally takes around 60 days to collect payments.

With annual sales of $2.5 million, that represents approximately $411,000 in receivables.

You'll need to finance operations while building up new receivables and waiting for customers to pay.

Here's what the situation looks like:

Investment requirementApproximate amount
Business purchase price$1
Inventory shortfall$200,000
Receivables funding requirement$411,000
Additional operating cashDepends on business needs
Potential total capital required$700,000–$800,000

These are illustrative figures from the example, not a calculation of the exact financing requirement for every distribution business. Supplier credit, accounts payable, and collection arrangements could change the amount needed.

Nevertheless, the central problem remains.

You might pay only $1 for the business but still need hundreds of thousands of dollars to operate it.

The Day Two Problem Nobody Talks About

Many aspiring business buyers focus almost entirely on getting a deal closed.

They negotiate the price, arrange the paperwork, and celebrate becoming a business owner.

But what happens the next morning?

I call this the Day Two Problem.

On day one, you acquire the business.

On day two, you're responsible for running it.

You need enough inventory to fill orders, enough cash to pay employees and suppliers, and enough working capital to support operations while waiting for customer payments.

A low purchase price doesn't eliminate those requirements.

It simply means you paid less to the seller.

And if the company has been stripped of the operating assets it normally needs, you may face a substantial capital investment immediately after closing.

When a Profitable Business Becomes a Dead Capital Business

Here's where our hypothetical distribution company becomes especially interesting.

The business might be worth approximately $330,000 based on its earnings.

But it could require $700,000–$800,000 in operating capital.

That's a serious mismatch.

I refer to businesses like this as dead capital businesses.

They require substantial capital to remain invested in the operation relative to the earnings and returns they produce.

The business may have customers, employees, millions in annual sales, and even positive profits.

But that doesn't automatically make it a good investment.

As I explained:

"A business can have customers. It can have millions of dollars in sales. It can even be profitable. But that does not automatically make it a good place for your capital." —David C. Barnett

If the investment required to operate the company is too large relative to its earnings, the buyer may be tying up money that could produce a better return elsewhere.

And buying that business for $1 doesn't solve the problem.

Why Some Owners Are Willing to Sell for Almost Nothing

Sometimes a seller accepts a nominal purchase price because the alternative is even more expensive.

Imagine the owner of our distribution company decides to close it instead.

They may need to:

  • Pay employee severance and other termination obligations.

  • Settle outstanding lease commitments.

  • Liquidate remaining inventory and equipment.

  • Pay suppliers and other creditors.

  • Cover the administrative costs of winding down operations.

Closing a business can require substantial time and money.

Finding someone willing to take over the operation—even for $1—might allow the seller to avoid some of those difficulties, depending on the transaction structure and liabilities transferred.

That's why a very low purchase price should make buyers curious rather than automatically excited.

You need to understand why the seller is willing to accept so little.

What Professional Turnaround Buyers Understand

Gordon Brothers didn't acquire Poundland simply because it was cheap.

They're experienced turnaround specialists who understand distressed businesses, restructuring, and financing.

They also had access to substantial capital.

That distinction matters.

Turning around a failing business can involve difficult operational decisions, additional financing, and the possibility that the turnaround won't succeed.

Someone with limited cash and little restructuring experience may be completely unprepared for those challenges.

Buying a distressed company isn't just about finding a seller willing to accept a low price.

It's about having the resources and expertise required to solve the problems that made the business distressed in the first place.

Five Questions to Ask Before Buying a Business for $1

If you encounter a business being offered at an unusually low price, don't focus exclusively on the headline.

Investigate what you're actually acquiring.

1. What working capital is included?

Determine how much inventory, cash, and accounts receivable will transfer at closing.

2. What liabilities will you assume?

Understand any outstanding debts, lease commitments, employee obligations, or other liabilities included in the transaction.

3. How much cash will the business need immediately after closing?

Estimate the money required for payroll, inventory replenishment, suppliers, rent, and everyday operations.

4. Will suppliers continue providing credit?

A new owner may not automatically receive the same trade credit terms enjoyed by the seller.

5. Does the total investment make financial sense?

Compare the full amount of capital required with the earnings and cash flow you expect to receive.

This last question is especially important.

A business can be cheap to purchase and still be an extremely expensive investment.

Final Thoughts: A Bargain Price Doesn't Guarantee a Bargain Business

The Poundland story demonstrates why business acquisition headlines can be misleading.

A retail chain changing hands for £1 sounds remarkable.

But when the buyer needs tens of millions of pounds in additional financing, the economic reality is much more complicated.

The same principle applies to small businesses.

You might acquire a company for $1, but if it requires $800,000 in working capital to generate $150,000 in SDE, you need to examine whether that investment makes sense.

The real question isn't how cheaply you can buy a business. It's how much money you'll need to invest to make that business work.

Always look beyond the purchase price.

Understand the balance sheet, calculate the working capital requirements, and evaluate the return on your total investment.

That's how you avoid turning what looks like an incredible bargain into a very expensive mistake.

Learn to Evaluate Business Deals the Right Way

If you're considering buying a business, my Business Buyer Advantage program can help you understand valuation, financing, due diligence, and the risks involved in acquiring an existing company.

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Want to understand business valuations more deeply? My book, Business and Asset Values, explores how owners, buyers, sellers, lenders, and advisors should think about the value of businesses and equipment.

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If you need help forecasting cash flow and understanding the capital requirements of a business, explore my Cash Flow Forecasting and Business Plan Writing Program.

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Thursday, September 17, 2026

PREMIERE- PG Insurance with Brendan Burdette and Ryan Conner

 


Can You Insure an SBA Personal Guarantee When Buying a Business? 

New guest – Brendan Burdette and Ryan Conner

Could insurance protect your personal assets when an SBA-backed business acquisition fails?

I’m joined by Brendan Burdette and Ryan Conner, founders of Braddock Road Insurance Corporation, to explain personal guarantee insurance for business buyers.

Tune in as we discuss how SBA personal guarantees work, when coverage may respond, how policies are underwritten, and what happens when a lender calls the guarantee after a business failure.

We also examine premiums, renewals, collateral, bankruptcy misconceptions, lender communication, moral hazard, and whether this new product could encourage more qualified entrepreneurs to buy businesses.

This is a must-see event for acquisition entrepreneurs, searchers, lenders, brokers, and anyone considering an SBA-financed acquisition.

Set a reminder on YouTube:  https://youtu.be/3lvrJLPgXnc 

It will be going live Thursday September 17, 2026 at 2:30 PM Atlantic Time and 1:30 PM Eastern Time

See you there!

David C Barnett


Monday, September 14, 2026

PST/GST/HST: What You Need to Know When Buying a Business in Canada

 

Buying a Business in Canada? GST, HST, and PST Could Cost You Thousands

Imagine negotiating a $500,000 business acquisition, arranging your financing, and preparing for closing.

Everything looks good until someone asks a question you hadn't considered.

What about sales tax?

Here in New Brunswick, where I live, the Harmonized Sales Tax (HST) is 15%. Applied to a $500,000 purchase, that could mean another $75,000.

Suddenly, your half-million-dollar acquisition might require $575,000 just to complete the transaction.

Fortunately, Canada has special tax provisions that can help buyers avoid paying GST or HST upfront on qualifying business acquisitions.

But there's a catch.

Not every transaction qualifies, and federal tax relief doesn't necessarily eliminate provincial sales taxes.

Understanding these rules before making an offer can prevent a very expensive surprise.


Asset Sales vs. Share Sales: Why the Difference Matters

Before discussing sales taxes, we need to distinguish between two types of business acquisitions.

In a share sale, you purchase shares of a corporation. The corporation continues to own its equipment, inventory, contracts, and other assets.

In an asset sale, you purchase the underlying assets of the business, which might include:

  • Machinery, equipment, and vehicles

  • Inventory and furniture

  • Customer lists and contracts

  • Websites, trademarks, and intellectual property

  • Goodwill and potentially real estate

This distinction matters because different sales tax rules can apply when business assets are transferred individually.

For this discussion, we're focusing specifically on asset purchases of Canadian businesses.

Understanding GST, HST, PST, and QST

Canada doesn't have one completely uniform sales tax system.

Depending on the province, you may encounter several types of taxes.

TaxWhat it means
GSTFederal Goods and Services Tax
HSTHarmonized Sales Tax combining federal and provincial components
PSTProvincial Sales Tax in provinces with separate systems
RSTRetail Sales Tax, including Manitoba's system
QSTQuebec Sales Tax

GST and HST generally operate as value-added taxes.

Registered businesses collect tax on taxable sales and may recover eligible GST/HST paid on business purchases through input tax credits.

But when purchasing an entire business, that process can create a significant cash flow problem.

For example, if you purchase $1 million in taxable business assets in a jurisdiction with 15% HST, you could face $150,000 in tax at closing.

Even if you're entitled to recover that amount later, you still need the money upfront.

And that creates a financing problem.

The GST44 Election: Avoiding a Major Cash Flow Problem

Canada's Excise Tax Act includes a provision that allows qualifying buyers and sellers to jointly elect for GST/HST not to apply to certain transfers of business property.

The election is commonly known as Form GST44, formally titled GST/HST Election Concerning the Acquisition of a Business or Part of a Business.

This can be extremely useful when acquiring an operating business.

But it doesn't apply simply because you're buying something from another company.

What Does "All or Substantially All" Mean?

Generally, the transaction must involve all or substantially all of the property reasonably necessary to operate the business or the acquired part of it.

The Canada Revenue Agency generally interprets this as 90% or more of the necessary property.

For example, if you purchase one truck from a trucking company, you're purchasing equipment—not the operating business.

But if you acquire the trucks, customer relationships, operating systems, and other property required to continue the trucking operation, the transaction may qualify.

You might not even need to purchase the company's real estate if the business can continue operating from the property under a lease.

The important consideration is whether you're acquiring what is reasonably necessary to continue operating the business.

Don't Assume the GST44 Election Happens Automatically

One of the biggest mistakes buyers make is assuming that including GST44 language in the purchase agreement means everything has been handled.

It doesn't.

The buyer and seller must satisfy the applicable requirements, properly complete the election, and ensure the required filing occurs.

If you're creating a new corporation to purchase the business, its GST/HST registration status should be addressed before closing.

As I emphasized in the video:

"Who is actually responsible for filing the GST 44, right?" —David C. Barnett

That question matters.

Your lawyer might prepare the transaction documents, but your accountant or acquisition company may be responsible for filing the election.

Make sure everyone understands their responsibilities and deadlines.

And remember that certain elements of the transaction, including some services, leases, licences, and real estate arrangements, may require separate GST/HST treatment.

Why GST44 Doesn't Automatically Eliminate Provincial Sales Tax

Here's the distinction I really want Canadian buyers to understand.

"A GST 44 does not necessarily mean no sales tax." —David C. Barnett

The GST44 election addresses qualifying federal GST/HST treatment.

It doesn't automatically eliminate provincial taxes imposed under separate legislation.

That's especially important in British Columbia, Saskatchewan, Manitoba, and Quebec.

British Columbia: Watch the PST on Business Assets

Imagine buying a business in British Columbia for $1 million.

The purchase price is allocated as follows:

Business assetAllocated value
Machinery and equipment$250,000
Inventory$100,000
Goodwill and intangible assets$650,000
Total$1,000,000

Even if the transaction qualifies for the GST44 election, British Columbia's PST rules must be considered separately.

Certain machinery and equipment may be taxable, while other assets or inventory acquired for resale may receive different treatment or qualify for exemptions.

The important question becomes which assets are taxable under provincial law.

Why Purchase Price Allocation Matters

Suppose the buyer and seller decide to assign only $25,000 to equipment and allocate the remaining $975,000 to goodwill to reduce potential PST.

That might sound clever.

But tax authorities aren't required to accept unrealistic valuations simply because they're written into an agreement.

If the business has machinery clearly worth hundreds of thousands of dollars, an artificially low equipment allocation could create problems.

An independent machinery and equipment appraisal may help support the allocation.

It can also provide useful information for financing, depreciation, and other aspects of the transaction.

Saskatchewan and Manitoba

Saskatchewan and Manitoba also have separate provincial sales tax systems.

Depending on the assets involved, provincial tax may apply even when the federal GST44 election is available.

In some circumstances, the seller collects the provincial tax. In others, the purchaser may need to self-assess and remit it.

These obligations need to be investigated before closing.

Quebec: GST and QST Require Separate Attention

Quebec has both federal GST and its own Quebec Sales Tax system.

Qualifying business transfers may be eligible for elections under both systems, but the requirements and documentation must be considered separately.

Buyers need to understand which elections apply, how they're completed, and who is responsible for filing them.

HST Provinces

In provinces such as New Brunswick and Ontario, buyers generally don't face the same additional PST layer that exists in British Columbia, Saskatchewan, or Manitoba.

That can simplify certain acquisitions.

However, qualifying for the GST44 election and correctly handling any exceptions remain important.

Other Taxes and Closing Costs Buyers Often Overlook

Sales tax isn't the only additional cost that can affect your acquisition.

Depending on the transaction, you may also encounter:

  • Land or property transfer taxes

  • Vehicle registration fees and applicable taxes

  • Legal and accounting expenses

  • Financing fees

  • Inventory and working capital adjustments

  • Other transaction-related expenses

And if the seller agrees to provide consulting services after closing, those services may have different tax treatment from the business assets being acquired.

The purchase agreement should clearly distinguish these arrangements.

Why You Should Negotiate Asset Allocation Early

Another mistake I frequently see is buyers negotiating the total purchase price without discussing how that price will be allocated among the assets.

Then, shortly before closing, someone suggests leaving the allocation to the accountants.

That's a dangerous approach.

The seller and buyer may have different tax interests, and an allocation that benefits one party may create additional costs for the other.

Instead, I recommend addressing the proposed allocation during the offer stage.

This allows you to review the numbers with your accountant, estimate applicable taxes, and understand the true cost of the acquisition before investing substantial time and money in due diligence.

As I explained:

"You do not wanna be sorting this stuff out two days before closing day." —David C. Barnett

Finding out that you owe an additional $30,000, $50,000, or $100,000 in tax just before closing is a situation you want to avoid.

Eight Questions to Ask Before Closing a Canadian Business Acquisition

Before finalizing an asset purchase, make sure you can answer these questions:

  1. Does the transaction qualify for the GST44 election?

  2. Is the purchasing corporation properly registered for GST/HST where required?

  3. Has the election been prepared, and who is responsible for filing it?

  4. Are there services, leases, licences, vehicles, or real estate requiring separate tax treatment?

  5. Does the province impose PST, RST, or QST that must be addressed separately?

  6. Which individual assets may be subject to sales tax?

  7. Is the purchase price allocation reasonable and defensible?

  8. Are any tax clearance certificates or additional provincial documents required?

These questions should be reviewed with professionals familiar with Canadian business acquisitions and the applicable provincial rules.

Final Thoughts: Know Your True Acquisition Cost

When buying a business in Canada, the negotiated purchase price isn't necessarily the amount of cash you'll need at closing.

The GST44 election can provide significant relief for qualifying asset purchases, but it doesn't automatically eliminate every sales tax obligation.

Provincial taxes, special asset categories, and other closing costs may still apply.

The key is to understand the complete financial picture before committing to the acquisition.

Get your accountant and lawyer involved early.

Understand the transaction structure, negotiate a defensible purchase price allocation, and confirm which elections and taxes apply.

That preparation can help you avoid unexpected expenses and keep your acquisition on track.

Learn to Buy a Business With Confidence

If you're considering buying a business in Canada, my Business Buyer Advantage program can help you understand the acquisition process, evaluate opportunities, negotiate deals, and manage financial risks.

Explore Business Buyer Advantage

If you need help building financial projections and determining the true cost of a business acquisition, explore my Cash Flow Forecasting and Business Plan Writing Program.

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Saturday, September 5, 2026

Would You Sell Your Business With 100% Seller Financing?

Selling a business to a trusted employee can feel like the ideal succession plan.

They already know the company, understand the customers, and may have spent years helping build the operation.

But if you finance the entire purchase yourself, you're not simply selling the business.

You're also becoming the bank.

That creates an entirely different set of risks.


Start With Your Own Financial Position

Before deciding whether to provide 100% seller financing, look at your own financial needs.

Ask yourself whether you need the sale proceeds immediately, whether you have other retirement assets, and whether you could financially survive if the buyer stopped making payments.

If your retirement depends entirely on receiving those payments, financing the full purchase price may create too much exposure.

Evaluate the Business First

The strength of the business matters just as much as the strength of the buyer.

Consider:

  • Cash flow

  • SDE or EBITDA

  • Tangible assets

  • Goodwill

  • Working capital

  • Overall marketability

A highly desirable business gives the seller more options.

If the company would be difficult to sell on the open market, an internal succession may become more attractive—but that doesn't eliminate the financing risk.

Evaluate the Employee Like a Banker

A long-term employee may understand the business extremely well.

That doesn't automatically mean they'll be a successful owner.

Entrepreneurship requires different skills, including financial discipline, decision-making, risk tolerance, and the ability to manage uncertainty.

Look carefully at whether the buyer has accumulated savings, demonstrated financial responsibility, and shown a willingness to invest personally in the transaction.

Where Is the Buyer's Skin in the Game?

One of the biggest concerns with 100% seller financing is that the buyer may have very little financially at risk.

A stronger transaction might include:

  • A down payment

  • Personal guarantees

  • Additional collateral

  • Home equity

  • Liens against other assets

The more the buyer has at stake, the stronger their incentive may be to work through difficult periods instead of simply walking away.

Structure Matters

An asset sale and a share sale can create very different levels of risk.

If you're financing a share purchase that includes inventory, receivables, cash, and working capital, you may be financing much more than just equipment and goodwill.

An asset transaction where the buyer provides their own operating capital may reduce some of that exposure.

The important question is: exactly what are you financing?

Seller Financing Means Staying Connected

If you finance the purchase, your relationship with the business may continue for years.

You may want ongoing access to:

  • Financial statements

  • Bank statements

  • Receivables

  • Payables

  • Balance sheets

  • Key financial ratios

Loan covenants and reporting requirements can also help protect your position.

If your goal is to sell and completely walk away, 100% seller financing may not match that objective.

Consider a Staged Buyout

A gradual ownership transition can sometimes provide a better alternative.

Instead of transferring the entire company immediately, an employee can purchase ownership over time while assuming greater responsibility.

This gives both sides an opportunity to see whether the transition works before the seller gives up complete control.

It may also allow the employee to build equity and financial strength along the way.


Key Takeaways

Selling a business and financing the buyer are two separate decisions. Before providing 100% seller financing, evaluate the buyer's financial strength, your own ability to absorb a default, and whether a staged transition could reduce the risk.


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Monday, August 24, 2026

New SBA rules Nobody is Talking about and how they're GOOD For buyers

 

New SBA Loan Rules for 2026: Why They Could Actually Help Business Buyers

The U.S. Small Business Administration has introduced new lending rules for business acquisitions, and I've been seeing plenty of people online suggesting they're going to make buying a business more difficult.

After reviewing the changes discussed in SBA SOP 50 10 8.1, my reaction is quite different.

I think several of these changes could actually be good for business buyers, particularly first-time entrepreneurs.

Why? Because they address a problem I've been talking about for years: buyers taking on so much debt that their businesses have almost no room for mistakes.

The rules, which the SBA scheduled to take effect on October 1, 2026, introduce more specific requirements for acquisition financing, equity contributions, debt service coverage, and financial due diligence.

Some transactions may become harder to finance. But that isn't necessarily a bad thing.


The Day Two Problem: What Happens After You Buy the Business?

I've spent years warning buyers about what I call the Day Two Problem.

Day one is closing day.

The buyer gets the keys, the seller receives payment, the broker earns a commission, and everyone celebrates.

Then day two arrives.

Now the buyer actually has to operate the business.

And if the acquisition was financed with enormous amounts of debt, even ordinary business problems can become serious financial threats.

Maybe a major customer leaves. Maybe an important employee quits. Perhaps equipment unexpectedly needs a $40,000 repair.

These aren't unusual events in business ownership.

But when almost every available dollar is committed to debt payments, there's very little room to absorb them.

The goal shouldn't simply be to close a deal. It should be to acquire a business that can survive the challenges of ownership.

SBA Acquisition Financing Gets Its Own Rules

One significant change discussed in the new SBA procedures is a dedicated framework for business acquisitions.

Previously, acquisition financing operated within broader lending rules that also covered other business purposes.

But buying an existing business isn't the same as purchasing equipment or expanding a building.

You're borrowing money based largely on the expectation that the business will continue producing cash flow under new ownership.

That's a considerable risk because the historical results were achieved by someone else.

The previous owner's relationships, experience, and knowledge may have contributed significantly to those earnings.

Now the SBA is placing greater emphasis on acquisition-specific underwriting.

The new framework distinguishes among different acquisition categories, including initial acquisitions, expansion acquisitions, and certain employee ownership transactions.

That recognition is important because different acquisition structures create different financial risks.

The 10% Down Payment Requirement and New Equity Rules

For initial acquisitions, the updated framework described in the SBA guidance includes a minimum 10% equity injection requirement.

But there's another important distinction.

The SBA separates equity contributions into what it calls unlimited and limited sources.

I personally find those labels confusing. I think unrestricted and restricted would be clearer.

Under the rules discussed in the guidance, certain limited sources can collectively satisfy no more than half of the required equity injection.

These may include qualifying seller debt on full standby and certain minority investor contributions.

For a buyer required to contribute 10%, this means the entire down payment generally cannot be manufactured from those restricted sources.

The buyer needs qualifying equity from other permitted sources.

And I think that's sensible.

A down payment isn't simply an obstacle that lenders put in your way.

It represents financial commitment and helps establish a stronger capital structure.

As I explained:

"Equity is what absorbs mistakes." —David C. Barnett

Equity provides a cushion when things don't go according to plan.

And when you're acquiring a business for the first time, you should expect that some things won't go according to plan.

Why More Debt Isn't Always Better

Many aspiring business buyers become obsessed with using the least possible amount of their own money.

They want investors to supply the down payment, the seller to finance part of the price, and the bank to cover everything else.

On paper, these arrangements can look impressive.

But what happens after closing?

The new owner may have bank payments, seller financing obligations, investor expectations, and very little liquidity.

The business must generate enough cash to satisfy all those demands while still paying employees, purchasing inventory, and maintaining equipment.

As I explained:

"High leverage requires extraordinarily consistent execution." —David C. Barnett

That's a dangerous expectation for someone learning to operate a company they just acquired.

Leverage can magnify investment returns when everything goes well.

But it also magnifies mistakes, uncertainty, and bad luck.

Debt Service Coverage: Is 1.25 Really Enough?

Another important part of the updated acquisition framework concerns debt service coverage.

For initial acquisitions, the transcript describes a historical debt service coverage ratio requirement of 1.25 to 1.

That means the business must demonstrate $1.25 in qualifying cash flow for every $1 of required debt service.

Consider this example:

ScenarioCash flowDebt paymentsCoverage ratio
Original performance$125,000$100,0001.25×
Cash flow declines 20%$100,000$100,0001.00×

A 20% reduction in cash flow eliminates the entire cushion.

And depending on the company's fixed expenses, even a relatively modest decline in sales could produce a much larger reduction in earnings.

I've long preferred substantially more financial breathing room in small business acquisitions.

A lender determining that a business can technically service its debt doesn't necessarily mean the acquisition is financially resilient.

Seller Financing and Investors Haven't Disappeared

One misunderstanding I've seen is the suggestion that the new rules eliminate seller financing or prohibit minority investors.

That's not how I interpret the changes discussed in the SBA guidance.

Qualifying seller debt on full standby may still be permitted as part of the required equity injection, subject to applicable limitations.

Full standby generally means that principal and interest payments cannot be made during the required standby period.

Similarly, minority investor contributions may still be part of an acquisition structure, although distributions and the treatment of those contributions depend on the applicable requirements.

The important distinction is how these sources are used.

Seller financing and investor capital above the required equity injection may also provide opportunities to structure a transaction more conservatively.

For example, a buyer might negotiate seller financing with payment flexibility during difficult periods.

Certain investor arrangements may also be structured to limit distributions when financial performance deteriorates.

These protections can provide flexibility that ordinary bank debt generally doesn't offer.

The point isn't to eliminate creative financing.

It's to ensure that the financing structure doesn't weaken the business before the new owner even begins operating it.

Larger Acquisitions Face More Financial Scrutiny

One of the changes I particularly like is the additional emphasis on verifying earnings.

The transcript describes a new quality of earnings requirement for certain initial acquisitions and qualifying expansion acquisitions involving business purchase prices of $3 million or more.

Under that framework, lenders must obtain a quality of earnings report in addition to a business valuation.

A quality of earnings review examines whether reported profits are accurate and sustainable.

It can involve reconciling financial statements, tax returns, internal records, and actual cash activity.

It also examines adjustments and add-backs that sellers use to present their earnings.

This is important because business buyers regularly encounter claims such as:

  • Certain expenses won't continue after closing.

  • A particular employee isn't necessary.

  • Vehicle expenses are personal rather than business-related.

  • Customer revenue will continue without interruption.

  • Historical earnings accurately represent future performance.

Those assumptions need to be verified.

And if the supported earnings aren't sufficient to service the proposed acquisition debt, the transaction may require less borrowing or more buyer equity.

A business being worth a certain price doesn't automatically mean it can safely support the debt required to pay that price.

That's a distinction buyers should understand regardless of SBA requirements.

Real Estate and Business Acquisition Debt Get Different Treatment

Another change concerns acquisitions that include commercial real estate.

Historically, some transactions containing a substantial real estate component could qualify for longer overall amortization periods.

That made monthly payments more manageable.

Under the revised approach described in the transcript, business acquisition debt and commercial real estate financing receive different amortization treatment.

The business portion generally follows a shorter repayment period, while qualifying real estate may be financed over a longer term.

That makes sense to me.

A commercial building can remain useful for decades.

But the goodwill, customer relationships, and operating advantages acquired from a seller may not retain their value over the same period.

Extending business acquisition debt simply to reduce monthly payments can make a questionable transaction appear more affordable.

Lower payments don't necessarily mean you're making a better investment.

More Time for Seller Transitions

Not every change creates additional restrictions.

The transcript also describes an extension of the permitted seller transition period from 12 months to as much as 24 months under the revised rules.

That could be helpful when acquiring businesses involving technical knowledge, complicated operations, specialized expertise, or long-standing customer relationships.

A longer transition may give buyers more time to learn the business and preserve important relationships.

For first-time owners, that additional support could make a meaningful difference.

What Buyers Should Do Before Applying for SBA Financing

If you're currently evaluating an acquisition, don't structure your transaction based solely on social media summaries or older financing advice.

Work with an experienced SBA lender and have them review the proposed transaction.

Ask about the applicable equity requirement, permitted sources of capital, seller financing treatment, investor restrictions, debt service coverage, amortization, and any required quality of earnings review.

You should also prepare a realistic cash flow forecast.

Don't assume that because a lender is willing to finance a transaction, the resulting capital structure is appropriate for your personal financial situation.

And don't build your projections around everything going perfectly.

Make room for unexpected expenses, lower sales, employee changes, and the learning curve that comes with becoming a new owner.

Final Thoughts: A Successful Acquisition Is More Than a Closed Deal

Some buyers may find the updated SBA lending requirements frustrating.

They may need to contribute more of their own capital, verify earnings more carefully, or reconsider financing structures that previously appeared possible.

But I don't believe buyers should measure success by how little money they contribute or how much debt they can obtain.

As I explained:

"The objective is to buy a business you can successfully own." —David C. Barnett

That's what matters.

A business acquisition should provide an opportunity to build wealth, generate dependable cash flow, and create long-term financial stability.

If stronger underwriting and more conservative financing help buyers avoid fragile transactions, I see that as a positive development.

Because the real challenge isn't getting through closing day.

It's making sure the business continues to succeed on day two, day two hundred, and day two thousand.

Note: This article reflects my discussion of the SBA's October 2026 lending changes. Buyers should confirm the current requirements and their application to a particular transaction directly with an experienced SBA lender.

Learn to Buy a Business With Confidence

If you're considering buying a business and want to understand valuation, financing, deal structures, and risk management, my Business Buyer Advantage program can help you prepare for the acquisition process.

Explore Business Buyer Advantage

If you need help developing cash flow projections and evaluating whether a business can support its proposed financing, explore my Cash Flow Forecasting and Business Plan Writing Program.

Explore Business Plan School