Adam Torres and Beau Eckstein discuss SBA financing.
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Show Notes:
What are the advantages of the SBA loan program versus other bank loans? In this episode, Adam Torres and Beau Eckstein, Founder of Business Ownership Coach Inc., explore how aspiring business owners can use an SBA loan to buy their first business.
About Beau Eckstein
Beau has over 20 years of experience in residential & commercial finance and business consulting. He is a licensed California real estate broker and also operates a consulting company that helps business owners grow their business by providing commercial mortgage advisory services.
Beau has a large network of bank and non-bank lender partners.
Beau also has a division which works with business owners to help reduce operating expenses, improve efficiencies, attract & retain employees, and automate & optimize all of a business’ payments. Our clients include construction companies, property management, and hospitality, amongst other business lines.
Beau works with new and established business owners and real estate investors.
About Business Ownership Coach
Business Ownership Coach Inc. helps entrepreneurs and business owners overcome uncertainty, frustration, and stagnation by providing expert guidance and strategic coaching. With over 25 years of experience, Beau Eckstein has helped countless individuals find and finance their businesses, empowering them to take control of their futures.Through personalized coaching, Business Ownership Coach Inc. offers the tools, insights, and strategies needed to navigate challenges, seize opportunities, and achieve long-term success in any industry.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of mission matters. My name is Adam Torres. And if you’d like to apply to be a guest in the show, just head on over to mission matters. com and click on be our guest to apply. All right. So today I have Beau Eckstein on the line. He’s founder of business ownership, coach Inc.
Beau welcome to the show. Thanks for having me. I’m excited to be here. All right, Beau. So we got a lot to cover today and a lot of business owners, a lot of entrepreneurs, a lot of executives that watch this. And what a great topic, SBA financing and how to buy your first business. So we’ll get into some of, maybe dispel some of the myths out there.
Tell them what are the best practices. But before we get into that, you get started in business? Where’d that start for you? So I was in the lending industry since I was 20 years old, I’m 47 now. So I started as a residential mortgage broker during the downturn of 2007, eight and nine, I got into doing a lot of investor financing where I did fix and flip loans and bridge loans.
I got bored of that, got into commercial. And then I found my love in SBA about eight years ago. Cause I believe SBA financing is really the best financing tool out there to, help American. You gotta be either a U S citizen or a permanent resident to help people get into business. Really. It’s amazing tool.
Yeah. what stuck out? , cause obviously with your background, you could have gone back into mortgage. You could have gone into other types of lending. You could have gone into, you know, alternatives. I mean, there’s so many other things you have done with your, skillset.
what kind of specifically was the light? Or that moment where you’re like, no, this is, where I want to spend my time. These are the individuals I want to help. Well, was a real estate investor and early on in my career and I was flipping houses, I was buying rentals. I started buying rentals out of state.
I was looking for cashflow and really I came to the realization to get cashflow. You really need an operating business. And then, how do you buy a business? And it’s like, how do you get high leverage financing? Well, it led me to SBA financing. So I self taught myself how to help people find this type of financing and that’s either with banks, credit unions or non bank SBA lender.
So really it was just kind of like a mission of mine to really Like my purpose was like, how do you get really wealthy over time? And that’s owning an operating business and then investing in a real estate for longterm appreciation and wealth creation. And so as you’re going through and you’re, as you said, self taught, so you taught yourself this in the beginning, like, did anything surprise you?
Like did anything surprise you as you were going through that journey? Well, yeah. I mean, you can get up to 90 percent financing on a business acquisition. you can get 80 to 90 percent on a franchise startup. And that’s pretty high leverage. And sometimes there’s not even collateral. So you don’t, necessarily have to own a bunch of real estate to have liens on those properties.
So like, To me, this was like the ultimate financing. And you could also, structure deals with none, of your own money out of your pocket. So let’s just say it was a million dollar business. That was cash flowing that you’re buying. The bank would lend you 900, 000. You got to come up with a hundred thousand.
Well, 5%. Up to seven and a half percent could be carried back by the seller on standby so I could buy a million dollar business that’s spitting off cash flow for 25 grand out of pocket and potentially I could bring an investor partner that brings in that 100, 000 equity injection as well so you could be extremely creative and you could basically Go from a W two employee to owning a profitable business.
If you find the right business and understanding how to structure it, of course, you have to have good credit, good outside income that sports outside debt and a little bit of experience in something that is closely resembles that type of business. It doesn’t have to be specific. But you have to have some skill sets, right?
And so it sounds like well, I’m curious. Why do you think we don’t talk about this more? Like when we talk about real estate finance, talk about a lot of the things, but we don’t, I mean, I do a lot of interviews, talk to a lot of people. Why do you think we don’t talk about SBA loans more? That’s a good question.
I have no idea. And Like, like we talked about, because you come from real estate, so I know you like, and know, everybody talks about that we’re talk, but we don’t talk about this quite as much, especially on the franchise side or other things like that, like the actual finance. It’s interesting. Well, I mean, when I started studying, so I didn’t go to university.
I was a terrible student. But once I found business and like real estate investing, I became the best student. I started going to workshops. I created my own curriculum. And a lot of people don’t understand, like, the tax code was not written for W 2 employees. People that are W 2 get taxed the worst rate.
If you understand the value proposition of, yes, creating a cash loan business or buying a business, but all the other benefits, like the tax benefits of this business, like Section 179. That’s the way you really create wealth. It’s not how much money you make top line. It’s what you keep in your pocket.
And that’s, what’s exciting about business. There’s no better tax advantages than owning a small business. let’s kind of juxtapose these a little bit. So I think a lot of people hear about, you know, going to the bank. Pretty often, like that’s pretty like, oh, the bank wouldn’t gimme a loan or whatever, you know?
Or the bank did gimme a loan. But that’s something we talk about a lot, a lot. So maybe juxtapose the SBA loan programs versus maybe some other type of bank loans in general. So the SBA program, it’s the SBA doesn’t make the loans. It guarantees, yep. The bank percentage, yeah. A percentage of the loan is guaranteed depending on the loan amount.
So, that as long as the bank or credit union or the SBA lender uses prudent lending and, crosses their T’s and dots their I’s, then 75 to 85 percent of the loan, but sometimes 90 percent is guaranteed by the federal government. So they’re more incentivized to do a little bit. Riskier deals.
I’m not going to say like, they’re going to like do something that doesn’t make sense, but they understand that the government wants them to stimulate the economy by lending money to aspiring business owners and also existing business owners. And that’s why it was created, right? And that’s why it was created in the first place is so that, it’s increased kind of taking the government’s taking some of the risk off of the bank, so to speak.
Is that, am I off on that? It’s a question. No, that’s really what it was. It really grows the economy. Look, if you’ve been in business for two years and you’re showing good cash flow on your tax, on your business tax returns, let’s say you’re a CPA. Instead of paying lease, you can do 100 percent financing.
We call it rent replacement and use SBA financing to buy a building as long as you occupy 51 percent of the space. So, I mean, it’s really, you can do, expansion financing. Let’s say you own an HVAC company and your competitor is retiring. You can go buy his business and potentially get hundred percent financing on an expansion.
There’s really no other way that I’ve seen. And I’ve looked at a lot of things to create wells. Utilizing strategic SBA financing and finding the right business and understanding now, should everybody own a business? I believe yes, but the degree of the moving parts of the business are going to vary.
For example, some people might be better suited to own a vending business, which we can, finance with SBA financing. there’s not a lot of moving parts versus like owning a staffing franchise where you’re, you know, you got more sales and there’s more moving parts. What we do, we help people find and fund their ideal business.
We do it, we do that together because we also have to figure out what’s realistic based on how much capital this person has. Are they going to try to keep their W2 job for a while until they can transition and get the business ramped up? So there’s a lot of factors that go into play. . Let’s talk about aspiring business owners and maybe getting their first SBA loan to buy the first business.
talk to me about the process and maybe what, what you’d suggest, how you suggest they use that. Sure. So well first you have to commit that you’re interested in buying a business, right? And then you have to, build a buy box. What type of business helps would align well with them based on their lifestyle, their current job, all these factors.
That’s what we do. We actually give people an assessment. It’s like a disc profile on steroids. And it really helps us uncover business models that might be a good fit. And then we help them create a buy box that way. And then we present. That’s why I like franchise ownership early on because franchise you plug into the support of a system and a lot of people transitioning from corporate companies.
Great. are much better suited for a franchise where they have support, coaching, infrastructure and marketing. So oftentimes I present franchise models as well as franchise resales as well. I’m not a business broker, but I do have a company that we help people in the franchise space find the right franchise. and so , when you say getting the franchise side of things, I just want, I know most people listening know what this is, but I just want to just take a second or two. So to unpack what you just said. Sometimes we think being a business owner, you have to have this idea. You have to create this thing.
That’s brand new and started from the ground up, which can be overwhelming and not saying that franchises aren’t work or that all of them succeed or any of that. But when you talk about going to Purchase the franchise, you’re buying into a system. You’re buying into something that has some type of proven track record in some market.
And maybe you’re buying a franchise from somebody that had it and is retiring or getting rid of that particular location for whatever reason, or needed some cash flow. So you can, there can be a, certain level of of infrastructure already in place. And that’s the point. Am I off on any of that? Or What would you?
You’re 100 percent correct. You’re 100%. Some of the franchises we work with that three or four or 500 units, some of them are more emerging. There’s pros and cons of like buying into a very established system versus an emerging brand. We don’t have enough time on this show to talk about, but, but yeah, you’re, you’re dead on with what you just said.
Well, Bo, I’ll tell you I think it’s interesting. how long does the amount of time type loan to go through? Like how does talking about like the logistics? So if there’s no real estate, it’s just a business acquisition. So generally it’s three weeks to 60 days. So it can be, pretty quick and assuming everything’s in order and that’s not a guarantee or anything like that, but it sounds like it’d be pretty quick if you have the right credit, you have the right, system and then, for you to go through your kind of coaching side of, thinking about even the franchise type of business or things like that, how long do you think, or how long have you seen something like that?
Generally like for the franchise discovery process, it starts with a 30 minute call with, with myself or my team. Then we give you the assessment, which it takes you 10 minutes to do. We get a copy of that. We then put together a thesis of what businesses might be the best fit for you.
And then we do territory research and brand research where we compile, we start wide and narrow it down. And then we come back to you in like within four or five days from the initial call. And we usually have about seven to 10 different business models that are available in your market that we think might be a good fit based on all the information we put together for you.
Amazing. Well, great having you on the show today. If somebody wants to follow up, I know we just scratched the surface. There’s plenty more we can get into when it talks about the funding process and obviously to get into somebody specific situation. How do people connect with you and your team? How do they follow up?
Just go to bookwithbeau . com. That’s bookwithbow, B E A U, bookwithbeau . com. Schedule a call. We’ll meet for 20 minutes initially 20 30 minutes. I can lay out a road map and, see if we’re a good fit to work together. Wonderful. And for everybody listening, just so you know, we’ll definitely put the links in the show notes.
So you can just click on the link and head right on over and connect with Beau and speaking of the audience, if this is your first time with mission matters and you haven’t done it yet, hit that subscribe or follow button. This is a daily show each and every day. We’re bringing you new content, new ideas, and hopefully new inspiration to help you along the way in your journey as well.
So again, hit that subscribe or follow button and Beau thanks again for coming on the show. Thank you so much.