Did You Know…
Roughly 90% of buyers:
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Are 1st time buyers
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Have never been in business before
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Will use financing to purchase a business |
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BusinessQuest Newsletter
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March 2007
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Private Equity Markets
The private equity market (both the number of investors and total dollars) has grown dramatically over the past five years.
However, many entrepreneurs do not have a fundamental understanding of the types of private equity investors and the investment niches they target.
Private equity funds are comprised of money from qualified investors, such as pension funds, financial institutions and wealthy individuals. These managed funds are then invested in privately-held companies.
Sunbelt works with hundreds of private equity groups and can help you learn more about the private equity market. Please call your local Sunbelt office for more information.
The following chart provides an overview of the types of private equity investors and their investment niches:
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Source: Vanac, Mary. "Private Equity in Spotlight." The Plain Dealer Nov. 19, 2006, G1. |
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SBA Loans: A Government Program That Really Works!
The Small Business Administration (SBA) is an independent agency of the federal government that aids, counsels, assists and protects the interests of small business. The SBA offers many loan programs and acts as a guarantor of loans made by banks and other institutions.
Fiscal year 2006 marked the sixth consecutive record year for increased SBA-backed loan volume. This year’s records included both the number of loans and the dollars loaned.
The SBA supported a net of 100,197 loans totaling $19.1 billion under its two primary small business loan programs. The 2005 fiscal year was the previous record holder with 94,554 net loans worth $18.1 billion.
These numbers are especially impressive considering past reductions in the SBA’s operating budget.
SBA Administrator Steven C. Preston feels that the record loan numbers reflect American entrepreneurs’ confidence in the U.S. economy and the SBA loan program.
Preston also noted the SBA’s continued commitment to support underserved businesses and communities. This is reflected by increases in loans to African Americans, Hispanics, Asia Americans and Native Americans.
Of the SBA loans distributed in fiscal year 2006, one-third were provided for minority borrowers, 32% were for new start-up businesses, 22% for businesses owned by women and 21% for businesses located in rural areas.
The SBA offers four programs to assist small businesses: Basic 7(a) Loan Guaranty, Certified Development Company (CDC), a 504 Loan Program, Microloan, a 7(m) Loan Program and Loan Prequalification. The 7(a) program, used for working capital, produced 90,477 loans worth $13.46 billion this year. The CDC 504 program, developed for the purchase of real estate and fixed assets, supported 9,720 loans totaling $5.61 billion.
Sunbelt has relationships with many of the country’s leading SBA bank lenders and assists entrepreneurs in obtaining SBA loans. For more information about SBA loans, please either visit www.sba.gov or contact your local Sunbelt office.
Sources: "Small Business Receive more than 100,000 SBA-Backed Loans in FY 2006, a Sixth Consecutive Record Year." Oct. 3, 2006. Small Business Administration. Nov. 7, 2006 <www.sba.gov/news>; Steiman, Jonathan. "SBA Approves Record Number of Loans." January 24, 2005. Inc.com. Nov. 7, 2006 <www.inc.com>. |
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Continued Growth In Mergers & Acquisitions
The worldwide value of mergers and acquisitions has reached a record of $3.4 trillion in 2006. The $18.7 billion offer for Clear Channel announced in November is one the largest deals in history. In 2006, there have been more than forty deals worth more than $10 billion each.
While banks and other lending institutions are still ready to finance business deals, there are market indications that the buyout industry will begin to slow in 2007.
As 2006 came to a close, it became evident that the growth in the economy was beginning to slow. This decrease in economic growth was anticipated to result in softened corporate earnings for the fourth quarter of 2006.
Additionally, many investment banks and private equity firms have begun to prepare for slower economic growth. By adding to turnaround practices and raising money for distressed debt funds, banks and PEGs are preparing for 2007. |
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Taxing Issues: 2006 Tax Season
The 2006 federal income tax return features a one-time telephone tax refund payment. This refund is available to anyone who has paid long-distance taxes on landlines, cell phones or Voice over Internet Protocol (VoIP) services.
The government is making this refund due to several federal court decisions finding that tax does not apply to long-distance service as it is billed today. Subsequently, the IRS is following these decisions and refunding the portion of tax charged on long-distance calls.
Any individual, business or non-profit that paid long-distance tax for service billed after February 28, 2003 and before August 1, 2006 is eligible for a refund request.
While standard refunds are available for individuals and families, businesses and non-profits must fill out the new Form 8913 and base their refund request on the actual amount of tax paid. The IRS is considering an estimation method for businesses.
It is estimated that approximately $10 billion will refunded.
Source: "Telephone Tax Refund Questions and Answers." Sept. 6, 2006. Internal Revenue Service. Nov. 1, 2006 <www.irs.gov/newsroom>.
With tax gap estimates exceeding $300 billion per year, the IRS has continued to increase enforcement activities.
The tax gap measures the difference between the tax that is actually collected and the tax that should be collected. The tax gap is defined by three categories: nonfiling, underreporting and underpayment. Underreporting of income tax, employment tax and other taxes represent 80% of the tax gap.
As more funds have been allocated for tax enforcement, the IRS will continue to increase the number of audits performed each year. In 2005, approximately 3.65% of sole proprietorships were audited. Audit rates for S-Corporations and large corporations also increased in 2005.
With a budget increase approved by the Bush Administration, more individuals and small businesses will face a stronger chance of being audited for the 2006 fiscal year.
Sources: "New IRS Study Provides Preliminary Tax Gap Estimates." Mar. 29, 2005. Internal Revenue Service. Nov. 1, 2006 <www.irs.gov/newsroom>; 2005 Internal Revenue Service Data Book. March 2006. Internal Revenue Service. Nov. 1, 2006 <www.irs.gov/taxstats>. |
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Sunbelt Book Club
Everyday Greatness: Inspiration for a Meaningful Life. Stephen R. Covey and David K. Hatch capture the wisdom told through the pages of Reader’s Digest. This book will inspire readers through the moving tales of those who have lived life to the fullest despite hardships. Commentary from Stephen Covey coupled with meaningful quotes provide insight into life and its challenges. Everyday Greatness retails for $24.99.
Street Smart Franchising. Readers will enjoy this straight-forward, realistic franchise guide written by Joe Matthews, Don DeBolt and Deb Percival. With examples from real-life experiences, this book offers honest advice about starting a franchise. This book retails for $19.95. |
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Office Owner Profile: Franco Ferrari
Q. Franco, what were the career experiences that led you to join Sunbelt?
I have been a business owner for over twenty years, beginning with a 15 unit restaurant business. I began to sell these units in the mid-1980’s and really enjoyed the selling process. After earning my real estate license, I sold the last three units myself. I became a full-time broker in 1987 and an office owner a year later. In 1993, I was approached by Sunbelt to open the first Sunbelt office in Florida.
Q. How do you promote your 10 county Sunbelt franchise in Central Florida?
I am active in SCORE, which is an organization devoted to free, confidential business advice for small business owners. I donate my time and money to provide my own seminars. In addition, I am on the Advisory Board of Directors for the National Entrepreneur Center.
I also have a call-in radio show on WFLA AM 540. "The Business Advisor" airs on Sundays at 10:00am, covering topics pertaining to buying, selling, and running a business. This is a valuable source of advertising for my offices, that compliments other forms of advertising used by my offices.
Q. Where do you see the future of business brokerage?
Business brokerage will be more professional in the future. Increased regulations in related industries, such as real estate and accounting, will increase the need for business brokers to exhibit the same compliance and knowledge.
For Sunbelt, our international network has the opportunity to capture a larger market through co-brokering. By being able to connect buyers and sellers across the country and the world, Sunbelt will be able to increase the amount of sales closings.
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