Thinking about buying a home service business with an SBA loan? This episode is your go-to guide. Jackquisitions sits down with Alan Peterson—who closed over $70 million in SBA acquisition financing last year—to break down how to structure high-leverage deals, navigate the latest SBA loan rule changes, and avoid the costly mistakes many first-time buyers make.
If you're serious about acquiring a home service business and want a financing strategy that actually works, this episode is a must-listen.
🔹 In This Episode, We Cover:
- How to use SBA loans to buy your first home service business
- The $70M+ playbook Alan used in 2024 for acquisition funding
- Why having the right deal team is critical (and what to avoid)
- The latest changes to SBA rules (including seller note restrictions)
- Multi-step acquisitions: what just got harder and why
- Pro tips for working capital, due diligence, and pre-LOI strategy
- How early-stage buyers can stand out and get taken seriously
- Why personalized financial statements are a game changer
- How Alan helps operators with pre-qual letters and deal reviews
🌐 More resources: https://www.ownedandoperated.com
👤 Hosted by:
🎧 Guest:
Alan Peterson
💼 Special Thanks to First Internet Bank!
Looking to buy or expand a business? First Internet Bank is a National Preferred SBA lender specializing in acquisitions for the skilled trades. Their SBA loan program offers up to 90% financing for business acquisitions, partner buyouts, and commercial real estate—plus optional lines of credit to fuel future growth. Unlike traditional lenders, they take a “how can we” approach, making deals happen for both first-time buyers and experienced operators.
👉 Special Offer: Mention Owned and Operated for a reduced good faith deposit and a complimentary deal review + buyside prequalification.
Connect with Alan Peterson from First Internet Bank here to get started
💼 Shoutout to Appletree Business Services
HVAC and plumbing pros—ditch tax surprises and unresponsive accountants. Appletree handles your books, taxes, payroll, and acquisitions, and they know tools like ServiceTitan cold.
🎁 Get a free tax & financial review or 10% off a QOE report.
👉 Book a call at appletreebusiness.com — tell Patrick Jack sent you.
207 Transcript
Alan Peterson: [00:00:00] I help first time operators buy real businesses with maximum leverage. I closed over $70 million in acquisition financing last year. Home services specifically, they're just really hot right now for 10 down, sometimes 5% down. You can buy a business that's cash flowing from day one. The members of your deal team should care about your long-term success.
Just because a deal can get done doesn't mean it should get done.
Jack Carr: Welcome back to Jack Acquisitions. Today I am extremely excited to announce on the pod we have Alan Peterson. Alan is an SBA guru. I am so excited to have him to talk to today. There's a lot going on in SBA. There's a lot from an acquisition side. Um, where, you know, your, your lender is gonna be one of the most important connections that you make and work with throughout this process.
Alan, how are you doing? Chuck? Thanks for having me on. I
Alan Peterson: [00:01:00] really appreciate it. Uh, I'm doing pretty well. Um, all things considered as the, at the time of this recording, we're backing into the hard stop date of the old SOP, um, and into the new one. So. You know, thankfully all the loans I had that would be adversely affected by the updates to the program, uh, are in, we've got our PLP numbers, which is jargon for the SBA authorization number, um, the number, the, of the approval number that needs to be assigned to the loan, um, by June 1st in order to.
Be qualified under the old rule book, so to speak. So besides the SBA moving the goalpost on me, uh, especially in some ways that have complicated, uh, acquisitions of, uh, the skilled trades and home services businesses, which is my specialty, uh, it's been good. I mean, hey, my kids are swimming without floaties.
There's a lot of good stuff going on as well, right. So
John Wilson: there you go. We just are finishing the best April we've ever had. [00:02:00] 55% year over year. Organic growth. Really just a huge thanks to Service Scalers for being our marketing partner in that a ton of that growth came from both paid and organic SEO efforts.
We did a ton of work on our SEO with service scalers, really strategizing and working on that about a year and a half ago, and the results have been creeping up over the past about year. Really started to go crazy over the last few months as we're starting to see multiple six figures of revenue attributed to our website.
I. And that's from their work on our SEO. On top of that, the management of paid has just been absolutely huge. Year to date, we're up 30 something percent. April alone was 55. And uh, we're just super grateful for service scalers in that partnership. So if you wanna learn more about how they helped us, make sure you check out service scalers.com.
I
Jack Carr: mean, I think you, we, we will talk a little bit about the changes in the SBA 'cause. I think that's extremely important coming up for people listening. But before that, I mean, you also mentioned that your specialty is in the home service field in SBA loans. Tell us about that. Who are you, how did you [00:03:00] get into this specific niche?
Um, yeah, and why Home services? I mean,
Alan Peterson: ultimately I help first time operators buy real businesses with maximum leverage. You know, I do that through the SBA seven A loan program we led nationally. We're industry agnostic. Um, but we find that the. Home services specifically, they're just really hot right now, you know?
And that's not saying that that's why I'm in the space, right? So for example, I closed over $70 million in acquisition financing last year. Um, a lot of those people didn't realize that they had the access to capital that they did, right? And, and that means that maybe I need to do a better job getting the word out and letting people know that, you know.
For 10 down, sometimes 5% down, you can buy, you know, a business that's cash flowing from day one. Um, you know, for me, the home services world is relatively Bezos proof, or at [00:04:00] least we hope it to be. Um, you know, I, I live in Tampa, Florida, Jack, and I'll tell you exactly what I do. If I have air conditioning issues, um, I pay.
Nothing else to it. Right. Uh, it, when I start sweating and my mm-hmm. There's one option, I open my wallet and I, and I pay. Yeah. Right. And um, you know, that's kind of the thing I like about it too, because, you know, when I look at businesses, I try to be very objective. Right. And these industries, to me, I'm extremely bullish on.
All the data supports that this is the space that is going to continue to grow. This is not just, you know, consumer confidence based, discretionary spending. This isn't luxury, this isn't boutique jewelry. You know what I mean? This is stuff that people really, really need. Um, and more importantly. You know, the people I get to work with in this space are really, really cool, right?
So it's a variety of folks that come into this world and are interested in this space. Maybe, maybe [00:05:00] it's because of, uh, pardon me, but, uh, I don't wanna say snake oil, but maybe it's due to, uh, Instagram reels. Uh, you know, maybe it's about, Hey, you got no money, no experience. You could buy a million dollar EBIT business.
Just get a seller note. It's that easy. And for 1500 bucks monthly, I'll tell you how to, how I did it myself. Then I'll rent a Ferrari and drive away. Right? That's not, it's just not reality. So I think there's a lot of interest in the space, but then when we get down to it, um, the people that are most successful are already doing their research.
They're already listening to podcasts like yours, like they're already, you know, ahead, experience. They're looking into industry specific questions. Um, and, and that's why I've had success there. It's a little bit based on the interest, but I've done plenty of these deals. You know, I'm, I'm happy before. I have three in closing right now.
Um, and two approved. I mean, those are five HVAC deals year to date, [00:06:00] um, that are in, and I closed one earlier outta, uh, upstate new. So that's all h. Roofing can have some unique challenges based on their model. You know, if it's dependent upon insurance payments, that can create some cashflow concerns, right?
Based on the ability to manage working capital, um, ebbs and flows, and that's all the stuff that we get in the weeds on. And when I work with people, we get into the weeds of those topics together, you know, um, we make sure that you're buying a. Just because a deal can get done doesn't mean it should get done.
You know what I'm saying? And, and that's sort of the way we approach it. And we find that our clients, the people we work with, really appreciate that, you know, um, we wanna be on their side, on their team. Be objective really,
Jack Carr: you know, at the end of the day, which is huge. 'cause I mean this is a relationship that you build, like I said at the beginning, that you build over you, you have to work with this lender for 10 years [00:07:00] if you close on an SBA.
Yeah. Or you pay it off a little early, but still. But on some, even if it with real estate, I mean, you're looking at 25 year relationship with somebody that you're crawling in bed with. And from an owner standpoint, you. Really can't get out of it other than refinancing to conventional or something way down the road.
But it's a difficult divorce process. And so, um, I always say make sure you are getting in bed with a really good lender who's setting you up for success and who's working with you, like you said, to go through a lot of these challenges and understand the business. I always tell people, don't, don't lean on the lender in terms of like, their job is not due diligence for you.
Their job is not sussing out if you should buy this business or not. But definitely having someone who's on your side is extremely Yeah, for sure.
Alan Peterson: And it, it's, it's the most important piece of the puzzle is that, you know, we get along well and we're supporting, you know, the same mission at the end of it.
Jack Carr: Yeah, exactly. And so with that, I, I mean, ironically I was talking to, um. Uh, [00:08:00] a very large scale broker, uh, who does only HVAC businesses nationwide. Yeah. He's down in Florida too. Yeah. I'm sure you know who I'm talking about. Yeah. He was saying, he was saying that he was working with you on two deals right now, and I was like, oh, I I love that.
Yeah. He's coming on the podcast tomorrow. So it's, it's such a small world in small industry once you get to that really high level. But what I was gonna ask is. What, is there any commonalities that you're seeing with buyers in terms of, just for my curiosity, right? He was mentioning that a lot of buyers are coming outta New York, New Jersey, trying to buy businesses down in North Carolina and Florida.
Um, do you see any of that kind of, um. That same trend or you seeing, uh, operators like myself expanding and buying businesses or operations guys buying businesses or marketing guys buying these businesses. Is there any trend at all that geographically? There
Alan Peterson: certainly is. And as someone who moved to Florida from Pennsylvania, um, in 2020.
Uh, my, my, my house is built a glass as far as any judgment towards people relocating [00:09:00] to, to, to Florida.
Jack Carr: It's not a judgment, it's just like curiosity. No, I'm confusing,
Alan Peterson: but, you know, all my neighbors are from Connecticut anyway. Yeah. But, uh, you know, it's, it's something that I do see a lot of people targeting geography.
The most common being Florida, Texas, and Georgia. You know, for the, for that reason, those deals tend to be more competitive, or at least there is the illusion of competition that, you know, without, you know, nefarious intent. We'll, we'll just say sometimes it's presented all the time. Like, oh, this is a Florida HVAC deal.
I got three cash offers behind you. Well, if that's the case, take the cash.
So geography challenging, um, you know. We've also done expansion deals for people all over the country that are looking to buy commercial real estate or acquire a competitor with Zero Down. So, you know, that's a compelling roll up strategy.
Jack Carr: Mm-hmm.
Alan Peterson: For some [00:10:00] folks, um, you can have up to $5 million. Yeah. I mean, think about, it's huge.
Like if you can do $5 million per.
HVAC until you can't anymore. Right. And then, and then expand into plumbing depending on the, the mechanics and your deal sourcing. Right. I'm we ran into Yeah. Yeah.
Jack Carr: Plumbing same, right? Yeah, plumbing same in a I CS code. But if you wanna expand into electrical sa, same point. Right. But like, that's actually our strategy, so Yeah.
Uh, I get excited 'cause it's like we are going to try, we still try. We bought four in the last. Two years, but we're trying to expand up to that 5 million mark and then go, Hey, we know we have to put money down again on a new N-A-I-C-S code. But that being said, like 10% as a business that has, you know, 5 million in debt.
So that means we're doing much, much, much better. Shouldn't be a huge issue at, you know, for, for that reason. Um, but still up to $10 million or $15 million in, [00:11:00] um. Like really nice loans. Uh, and for acquisitions and growth, it would be a huge growth strategy. Absolutely. And there's no way around that. And there's also
Alan Peterson: whispers and we'll see what happens with it.
That VSBA limit is to go up, right? So, you know, right now it's all about manufacturing. That's the big piece of the narrative. But I think that, you know, there's an optimistic viewpoint that we will see the seven a program go beyond $5 million. And I don't think it'll take a super long time. You know, the, that's, that's kind of the narrative that people in DC are kind of agreeing that the loan limit's been in place for a long time.
Um, it, it's just time for it to go up. Will it go up to 10 million? I don't know. Um, 7 million might be a more appropriate target, but still, I mean, that's a benefit we'll see. Um, as $5 million is still plenty of exposure to be able to do with such little down. Right. It's all about the leverage.
Jack Carr: Exactly. And um.
I mean, super interesting and, and that you mentioned [00:12:00] manufacturing and all that. Um, and, and so moving forward, I mean, I know there's lots of changes happening in the industry. You kind of mentioned it like it's at the forefront of your thought going into June as we record. Um, I mean, maybe we bring this up now.
I, I had it slated for later in this conversation, but I think it's a good, good transitionary time, so. There are a lot of changes happening in this, but there historically has always been a lot of changes. I remember a couple y like a year ago, they were saying, now you can am, you know, you can refinance and amortize the entire, um, loan into the, the new amortization if you buy real estate.
And then they said, oh, no, no. Now you have to, you have to do it as a percent of the entire portfolio. So there's just always changes and, and it's always. Flexing. Um, with these new changes coming out, what are some of the biggest items that you see? That new potential buyers should be aware of? Absolutely.
Alan Peterson: So what we have seen in the changes, the main, the main changes [00:13:00] in my view were almost to, I don't know. I mean, it, it feels as if the ETA community at large was. To, had to take a step back in some ways based on the changes. However, we're seeing good deals getting done still. Um, sellers accepting lois with the new structures, the new structures specifically are that if a seller retains equity in any capacity, even less than 20%, we can no longer do a multi-step acquisition.
So think of it this way, a multi-step acquisition would be I'm buying a business. I wanna do it via asset sale. So I form NewCo with seller as 10%, we'll say very common, or five, whatever it might be. They own 10% of NewCo. We complete the acquisition via asset sale. And, and it goes on. We can no longer do that.[00:14:00]
So any partial change of ownership where a seller is to retain any amount must be done. The stock sale. Additionally, it'll trigger the need for them to guarantee for a period of 24 months. Um, it was. It communicated at Nagle. That's the National Association of Government Guaranteed Lending. Uh, it's the large advocacy group and essentially lobby, uh, in DC for the interests of the SBA lenders.
Um, it was communicated there that while the guarantee for the seller. Must be there for 24 months. It does not have the same collateral requirement. So that is a little bit better than what we first thought it would be, but it's still gonna be challenging, let's be honest. I mean, we have a retirement age seller.
Jack Carr: Yeah.
Alan Peterson: I don't, I don't know if they're gonna guarantee 24 months of, of debt unless it's to maybe a key employee. It's to someone really known to them. It's someone that they trust, it's someone they're looking to put on. Um, you know, and we can get [00:15:00] deeper into this later, Jack, but I always try to stress upon that point, the psychological element of the seller liking the buyer.
Legitimately is worth more than just the final cash at close. I've seen it myself. You know, um, that being said, it's a still hard point to negotiate. The, the other piece besides the seller having to retain equity, having to guarantee, which by the way was our go-to licensing strategy. You know,
Jack Carr: please. So that's what I was, yeah, yeah, yeah.
Can we, can we start, can we touch base on that? Yeah. So I mean, I think that's, that's one of the biggest questions I get. Luckily, Tennessee doesn't require an HVAC license, and so this never really was an issue. There's, there's some weird, it's a double-edged sword, right? On one end, I don't need a license under 20 5K and in specific cities and, and counties to install an HVAC system.
That allows for high levels of low level competition, trucks and trucks, [00:16:00] single guys, guys that just want to go out on their own and huck units around. Um, it's a very unique perspective, but it also allowed me to get into the business without having to have this issue specifically keep an owner on worry about licensure, blah, blah, blah.
Since then, I've gotten all the licenses myself just because it's easier for me to. To carry them. But hi, the, the question we get all the time is like, Jack, how do I do it? I live in Georgia. We don't have that, that ability, how do I buy without the license? And so there's historically been a few ways, the way that you mentioned where you keep the seller on.
The seller keeps the licensure, they get a little cut. Um, and then. Good to go. Um, but then another way that we've seen right, is they hire somebody. They hire somebody who can get the licensure for them. Is that, is that no longer available as an opportunity route for people?
Alan Peterson: No, that's actually the preferred route now.
I, I would say as far as a strategy standpoint, obviously equity costs more than debt in the long [00:17:00] run. I acknowledge that. But that being said, with execution and approval in mind, I would take it a step further and identify someone who can qualify the business that currently has no equity. Target and give them a slight percentage, the same amount that you'd be comfortable leaving the seller.
Why wouldn't you offer that a third party now that's gonna take. You know, give it, you know, why not? But it's something like that.
Jack Carr: I mean, I'm glad though, like that, that, that's in my mind the best way to do it. That's what I recommend all the time, is to say, Hey, go find somebody in this market who is, you know, maybe older, retired, still has a license, but still kind of wants to work a little bit, wants to.
Be on, on board as a consultant, work with you guys on some bigger projects, things like that. There's more value than just the license itself and you pay them a small amount or a little bit of equity here, and you have a partner, uh, a very small end partner, but somebody who makes [00:18:00] sure that you're not, you know, shooting yourself in the foot.
And I think that there's huge opportunity. I mean, I see it all the time on the forums of people offer offering licensure or. Um, asking for it, and I know that that is a huge market to be able to, to do that, so I'm glad that that's still available. The other, you said stock sale, which is, you know, on a.
Construction based company is something, I'm not a lawyer, but I know I wouldn't do it either. Um, that being, that being said, you know, there are certain CI circumstances where it makes sense. Um, there are lots of circumstances where it doesn't make sense, but, um, uh, I'm glad that they still left some doors open to be able for non-licensed trades people or non-licensed buyers to work with.
License, tradespeople and continue to buy businesses. I don't think it shuts the door completely
Alan Peterson: and also keep it buying Jack. So if you identify someone through forums, through whatever outreach that you wanna put into action, as long as that individual, [00:19:00] right, they're not currently an owner, so there's no guarantee requirement they can have up to 19%, and I'm not suggesting that.
You know, you, you run with 19%, but I'm just reminding you that that triggers no guarantee. We're not pulling their credit. We're not getting three years of tax, we're not doing all that. We're gonna reference them in the business plan. We're going to reference them as part of the overall strategy, their history.
I'll still grab a resume on them, you know, but their personal liquidity doesn't matter. Their FO score doesn't matter. It's just their ability to, you know, qualify the business. But also they should bring some. Real experience that can be relied upon, uh, for advice during transition. Um, and you know, it's interesting, I'm working with a client now.
They did a plumbing business that was ma it was mostly commercial and they had some residential in there as well. Uh, they're in the DFW market and I'm actually doing their second deal now where they're acquiring some real estate as they're growing. It's working. Those are the calls I [00:20:00] love getting, you know, and what's really cool is.
They first got their qualifier. Using Facebook groups for plumbing operators and then LinkedIn, and they found people, they talked to them on a Zoom call. They were like, Hey, we're young, we're hungry. We've been studying the industry. We just don't have a way to qualify. Would you come on and also give us some advisory?
And this individual, they, they targeted at a successful exit previously, which to me made a great sense to give them some equity. I mean, A, they're qualifying the business. B, they're sharing their playbook. Of why they're hanging around on Facebook forums now instead of working these days. Right. Um, so that's, that still works.
So for anybody listening out there, um, just know that those are the, the important moving parts and you don't need to worry so much about their individual credit worthiness. It's all about their operating experience and ability to qualify the business, the [00:21:00] rest of it. Well, that's on you.
Jack Carr: Yeah. No, I, I love that.
So I, I'm glad, I'm really glad that this is the way the conversation went, because that was my worry with the new changes is that they were gonna somehow snub that out and make, make them do a personal guarantee or something. But it's only the sellers. But, um, yeah. That's amazing. 'cause I, I think that was the way to go anyway.
I personally am not a big fan of working with sellers, just as my personal beliefs. Uh, there's some great sellers out there. I'm not knocking all sellers. I'm just saying that. Historically for me, I am a do not work with the seller, uh, camp. And so this allows you to really not be tied to the old, the seller or the old owner.
And it allows you to actually pick and hire more of a hiring process and partnership process. Um, so good, good stuff. And, and so that's one of the big changes. What are there any massive, other massive changes that we should keep an eye out for that really will disrupt, um. How we buy businesses [00:22:00]
Alan Peterson: as we covered that really important piece as the late great pitchman of Oxyclean fame, Billy Mays would say, but wait, there's more.
And uh, here's the more. Um, the seller note,
Jack Carr: yeah,
Alan Peterson: can only count towards the equity injection if it is on full standby for the life of the loan. It additionally cannot account for more than 50% of the total injection required. So very often what we used to be able to do was do a seller note on standby for two years, followed by most often three years p and i payments with no balloon.
It was more, it was more favorable for the seller, it was easier to negotiate. Um, but what I'm seeing already, and I'm saying this sincerely, um, is that sellers are already kind of. They're not as in tune, like with the rule changes as maybe [00:23:00] some of us that are really in the trenches of this, or even acquisition entrepreneurs that have, you know, been close to LOI or kind of getting through the motions and doing kind of their initial homework and they're getting serious, you know, there's a learning curve and that advantage is in, in the side of the buyer, in my view.
Um, what, what I've seen people do is they say, listen, I'm gonna pay, you know, I'm gonna request a 5% seller note. On full standby for the life of the loan. I'm gonna share that secondary market data suggests that it would be abnormal for me to hold this loan to maturity. That being said, you potentially would have to be on standby for 10 years.
The what I would like to do. Is increase my offer by 5%. And you know that, that sounds gamey. I'm not saying to do that, right? That's not my place. I'm a W2 employee of a financial institution and this is a recorded call, joking, right? Uh, but as a deal guide, a strategist, I've seen that work for people that are [00:24:00] actively in my pipeline and that allows you to come in with 5% down.
As long as 10% of the total project is. So keep that in mind. The total project isn't just the acquisition, it's buying the business. It's any work and capital to be provided by the bank. We always include lines of credit. It's something I always do. Adequate capitalization is a non-negotiable for me if I can make a deal work, but I cannot.
Be certain you're getting enough working capital to support yourself during transition while the cash catches up, and if that stresses the DS R. Too low. We gotta negotiate that there might be some cash left behind, you know? But, but anyway, I'm kind of getting off track and tendency to do that, Jack. So be my guardrail.
I mean, I think,
Jack Carr: I think No, you're all good. That's, that's amazing. Yeah, so I mean, I'm, I'm in the same boat. Uh, the nice one nice thing for everyone listening about home service businesses, if that's where you're at versus the [00:25:00] manufacturing or some e-commerce store or something like that, is. There's very little working capital, right?
I think when I bought my business, uh, I think I had $37,000 in working capital. So not like crazy amounts. Whereas if you had to order, you know, something for your manufacturing plant, you needed to put in an order, uh, for material at two or $3 million, right? So we don't have those kind of long drawn out capital constraint or capital needs.
Um, and then we have a fast ca fast cash cycle. So we sell the, sell the item. Get paid. Uh, at least in, in residential commercial, you know, you could be 30 60, but still it doesn't, it doesn't expand out that cash, um, cycle too much, but fully agree on, on the working capital, right? That is one of the most important things is making sure that you are well capitalized going in because you, you will need it.
Uh, I think we, we needed it for the first entire year before we got our feet really under us and started generating to a point where that didn't matter anymore.
Alan Peterson: I. [00:26:00] And that's what it's all about, is giving that support. Jack, just to piggyback that a little with a little more clarity of the way I personally look at it is listen, if we, if we predict that you've got a 60 day cycle and we're gonna assume it's a cash free, debt-free transaction, which is very common, so anybody newer to the space or is just kind of dipping their toes in the water, that would imply that the seller at closing will satisfy all.
Be left. However, all the cash is essentially cleared out of the cash register regardless of industry. We see that very common. That allows you to negotiate for ar, you know, work in progress as it becomes ar, and then inventory. Inventory is usually easy because, you know, if the seller's gonna retire and head off to Mexico, I don't know what they're gonna do with a pallet of reams.
You know what I.
Through third party financial due diligence. Don't skip financial due [00:27:00] diligence, qe, proof of cash, whatever is appropriate. Do something, get a third party, an unbiased third party to put their eyes on it. The bank's gonna do our job, but I always advise and continue to do that when we have our working capital target.
I like to extend that a bit more. Okay. Um, just to be safe and then also with a line of credit is nice because it's a break in case of emergency fire alarm. Okay. If you need it, you've got it. If you don't use it, quite obviously you don't pay for it. And, and in the spirit of like working capital, I do wanna call out something too.
Jack, as I just touched on financial due diligence, a lot of people don't realize that out of pocket direct deal related expenses. Will count towards the project. There'll be project items, which means that your out of pocket payments will count towards your equity injection, so the money you're spending on financial due diligence.
A lot of people don't know that. [00:28:00] Interesting. Yeah, we do. We
Jack Carr: I didn't know
Alan Peterson: that I do it. I don't know if, I don't know if, yeah, I didn't know that. You know, my friends at Wells are doing that, but, but we are. Right. So it's, that's an exciting thing where we've got quality of earnings. Oh, man, I gotta outlay that cash.
Yeah. But a, that risk is way smaller than a pg we, we all should agree on that. And then legal, you know, m and a attorney work that's done pretty close. We can do that. We can put them on the settlement statement. Pay your attorney a close, uh, professional business plans and projections. You know, if that's something that you wanna do do due to bandwidth or you want it exactly how the bank wants to see it, all of those things are gonna count towards your down payment.
Now that came outta left field, that whole topic, Jack, but I get excited about what are the things people don't realize about the program, and that is. A big one. People are always surprised to hear that. People
Jack Carr: always surprised to hear. Yeah. I mean, I am, I definitely paid out of pocket from a different account [00:29:00] for all that, those items.
So that's really interesting that that, which honestly, now that I'm in, in the business, that actually makes more sense. 'cause as you work with attorneys to do different projects, like, hey, we wanted to switch our, we wanted to raise capital. A lot of them will defer and then roll in that that's, that's a commonality in.
Kind of the, the banking sector. It's just, I don't know if it's something that, you know, is going from a W2 into a, a owner. It's something that we are, uh, privy to that knowledge very often. And, and it's, um, that's really cool. I mean, I didn't, I didn't realize that at all, but now I can start, start saying that at least, at least Alan does it.
Alan Peterson: Yeah. Yeah, absolutely. And we look at it as we're de-risking the deal, right? I mean, why wouldn't we try to support the effort of you further de-risking the opportunity? It's a true benefit to the bank as well, admittedly. Exactly. It's a true benefit to the bank,
Jack Carr: right? Yeah. You get due diligence, you get better m and a, uh, [00:30:00] legal support, like all of those things is better for the deal in the long term for survival.
Um. Wonderful. And then to, to circle back real quick for everyone listening, um, so the original point of this, this topic was we were talking about that they, they moved the, the requirement for seller financing towards your equity injection. So the seller's amount that they can put towards that 10% so that you don't have to pay that whole 10% needs to be at a 10 year.
Um. Uh, what is it? Deferment. So they can't, the seller can't accept payment befo before 10 years, but '
Alan Peterson: cause slight, slight correction, it'll be, it's not for 10 years. It's not for 10 years, it's for the life of the loan. And I call that out because when you're negotiating that, if there's anybody you know at home or in a car stuck in traffic, or you know those, that's.[00:31:00]
Just know that the language is important here. Language tip, always call it for the life of the loan, and then try to instill confidence in your ability to pay that down significantly quicker or to establish the health of the business in a shorter period to refinance and do commercial. To conventional commercial, to a regular business banking situation.
When you have three years of business tax returns with your name as the owner, you're looked at considerably different than when you're a W2 that's looking to buy a business. I mean, it's, it's just why acquisitions are typically done, SBA, right? So I just wanna call that out on, on that, Jack. But yes, the seller note needs to be on standby for the life of the loan.
That's the language in, in there. That sometimes can be a hard pill to swallow, especially when we talk about, you know, the. Retirement [00:32:00] age individuals. You know, I, I was gonna say silver tsunami. Um, I don't know if, uh, Eric, uh, has that trademarked if I'm gonna get sued, but I, you know, it, it's, it's something where,
Jack Carr: right.
Yeah. You
Alan Peterson: know, that's, that can, that's a negotiation point that certainly is more complicated now than it was. Four weeks ago.
Jack Carr: Mm-hmm. Yeah. I mean, the way I sold it to my, so we had a bit of that. We, we did the 10 year, because I don't, that rule is, was fairly new. It, it's kind of ping ponged back. Right. So it used to be this way, then it went.
A different way over the last three years, and then now it's coming back. Is that correct or no? Was I just, is this another miss on my end?
Alan Peterson: Oh no, not at all. Jack. This is a return to normalcy based on increased default rates and perception that the rules that they roll back were more of a benefit to a seller.
Than they were ultimately to a borrower or, or in this case, buyer, right? Which is the spirit of the SBA, you know, job retention and creation, not [00:33:00] necessarily sophisticated lower market to Main Street micro PE model. Benefiting from a government guaranteed program. I mean, it's a return. It's, it, it,
Jack Carr: yeah.
Alan Peterson: And it was fun while we had it.
I'm not, listen, I'm not, not, I just rocked the plan. I got so excited. Right. Um, but no, it's, it's not a, it's nothing new. It is a return. And honestly, like, it's been something where, if I can say transparently. It's broomed away a lot of buyers that were reaching out that weren't necessarily serious or weren't necessarily in a position, they hadn't thought about it for a while, and they saw a reel from a guru type and they wanted to know, you know, whatever.
And now that it's like 10% down, they're like, oh, you gotta be kidding me. 90. It's only 90% leverage, you know? So. It. It is what it is. But yeah, to your point Jack, it's a return to way it always has been.
Jack Carr: Just answer the phone. It is one of those phrases that's [00:34:00] always easier said than done. I know it was hard for me and my business 'cause the phone always rings while you're out in the field trying to get something done.
Or it's 8:00 PM and you're trying to get your kids to bed. Well, I have the solution for you. I'm extremely excited today to announce Quick Staffers, your go-to solution for building a high performing cost effective customer service team. We are placing CSRs who have been. Pre-trained on proven home service, SOPs and scripts, the same ones that Wilson and I use in our business.
For a limited time, we're offering $500 off your initial placement costs for the first 10 signups. See link in the description below, or head over to quick staffers.com for more information. Well. That, that was the circumstances and where the way I bought my business. And, you know, I think I used some kind of line similar to that as like, hey, I'm focused on hypergrowth, we are projecting that we'll be, we will close out our loan in about four to six years.
And then that, that last 5% that they keep on for the term of the loan, um, or can't get, can't touch for the term of the loan, [00:35:00] um, or life of the loan, uh, ended up becoming much quicker. So our seller got paid off significantly quicker. For his Then, as you mentioned, market data Yeah. Ends up pushing it faster.
So interesting.
Alan Peterson: It's also a way to put them to put the ball in their back, in their court, like listen, with your year to date un uh, unaudited p and l that you've shared, uh, on your rocket ship growth trajectory, we'll clearly be able to pay you back sooner. And if you have doubt about that, should I have doubt about 2025 year to date, uh, tripling historic performance.
Again.
Jack Carr: Well, you said the seller. You said that All I had to do was add marketing and this thing would take off. So that's what we're doing. That's what we're doing.
Alan Peterson: We're doing a little bit of SEO, a little bit of PPC, another three letters that are related to internet marketing. And we're rich, baby. We're on the beach.
We're on the beach. It's over. It's easy. It's easy.
Jack Carr: Yeah. You
Alan Peterson: know
Jack Carr: that's sarcasm for anyone, anyone [00:36:00] watching my, me and my mustache twitch as I say it, that's
Alan Peterson: disc.
Jack Carr: So, yeah. Right. I just wanna make sure everyone's really clear on what I said. Um, and with, with that, Alan, I mean, so I wanted to take a second, and my belief is that there's, there's a job on, you know, on buyers specifically, which is a lot of what, who our listeners are is there's a job and an onus by them in this process where they start looking for a business to brand themselves, to be able to showcase themselves to a broker and to a seller that they are.
A good buyer for this business and that to the broker that I'm a good buyer and a real buyer and I'm not gonna kick tires for you, what does that look like? How, how should an individual position themself with, as they have those first conversations with you, to showcase that this is someone who is really willing to go the way they're not one of the 2% of.
Of people that, or they are one of the 2% of people that are going to make it [00:37:00] to close. You
Alan Peterson: know, we start with a buyer prequalification letter. You know, a bank letter of support is something that I can produce within 24 hours, and all that I need is a, uh, personal financial statement. Which, you know, we have a template we prefer to use.
It's SBA form four 13, but we can look at it in any template and you know, if you are not familiar with the document for any reason, a personal financial statement, think of it as a balance sheet for your household. So it'll list your assets, also your liabilities, so we can get a clear picture of what your liquidity is.
You know, that really helps me tell you, hey, based on what you've had. Are you gonna use investors or are you not gonna use investors? How much you know, are we talking about this or that? That means that I can pre-qualify you up to an amount that you can really get home on. Um, the, the other piece that we need is a management summary or resume [00:38:00] and that's it.
Jack Carr: Yeah. So with that, um, the PFS, the personal financial statement, pencil whip, or not pencil whip. So, and what I mean by that is Right. Do. Do, does our listeners, should they, when they, when they give this form to you, if they're general ballpark, or do you prefer that they are exact? 'cause those can be pretty onus, right?
They, they have, do you have any assets? Do you know, what are all your liabilities? Oh, your rental properties, and what are their values? What do you pay per month for this? What do you pay per month for that? So it really does it, it's a decent sized form, right? It's two to three pages of some in-depth, uh, financials.
Alan Peterson: Leave it to leave it to the gov, right?
Jack Carr: Yeah. Right. Um, and so do you prefer that, like, is it okay if that somebody gives you a form and they're like, Hey, my house is worth about 500,000 and I have about 243,000 in debt on it, or do you prefer that they're like, Hey, no, I have. 200 thou, 243,617 and 12 cents.
Alan Peterson: No, uh, [00:39:00] the former all day long. So, you know, just know that all I'm looking for here is a realistic ballpark, you know, and wh when we're looking at cash, I look at cash and cash equivalence. Not every bank does that. So when I'm looking at your total liquidity, I'm looking at checking, savings, brokerage, and retirement.
If applicable, yes, there's penalties for accessing those funds. However, yes, you can access them in an emergency, so we're gonna look for that still. That can be a ballpark, because what I'm looking for, ultimately, if you communicate that your desire is to put the full 10% down, I wanna make sure that you have what's called post close liquidity, which is something that is not.
As talked about as often as a lot of the other moving parts of the SBA loan process, but essentially what we want to do is make sure that after you've made the equity injection, [00:40:00] you still have adequate reserves in case of a personal emergency in case of a turbulent transition period. In case you totally mess up the transition and you kick the door in on a break room in a Patagonia vest in an NBA under your arm, and you tell the 15 year people that have built the business, you bought that there's a new sheriff in town.
All of these things can happen and we try to prevent them Personal liquidity. It does matter. I I usually target about 5%. Yeah. But we can do less if there's other strengths in the deal.
Jack Carr: Interesting. Yeah. And then with that, uh, do you all, uh, and this is more of a curiosity 'cause during my process, I got in a big argument over this with our bank.
Um, do you require that the, they match their pre W2 income to their projected income for the DSCR? DSCR? Yeah.
Alan Peterson: No. No, no, we, no, we are going to, so we are going to use, we're, what we're looking to do is we're [00:41:00] going to use the PFS as our initial guide. I'm gonna use the discovery call that I always try to have early in the process to talk about things like outside income, to remain, to talk about things like perhaps a spouse has, has income that can support the.
Financial needs of the guarantor. We're gonna talk about different ways to maximize that pre-qualified amount. And that's not to say you have to swing for the fences, it's just to open up as many doors as we can. Your prequalification is, it's your hunting license. That's what it is. It's sell side brokers, intermediaries, sellers themselves know you're serious, you're real, you're engaged.
Oh, and by the way, you can actually get a deal done. You know what I mean? So that's the purpose of it. So we are gonna model your replacement salary for whatever you list on the PFS at first as your ballpark monthly debt obligations. If we don't have outside income from a spouse, and if you might have another [00:42:00] business, you might have a a side hustle, your W2 might remain in a reduced capacity post close.
When we pull the personal credit report that those numbers line up though, right? So if you tell me that your mortgage is two grand a month and it turns out to be three, it's not the end of the world, but it's another 12,000 that we are gonna build in because I want your set obligations to be covered at the minimum and anything above that for my purposes, year one, year two, take that from distributions if you need cash or figure something else out.
You know what I mean? But yeah, we're gonna forecast we're back As much comp as.
Jack Carr: For anyone listening, I don't think you guys understand how amazing that statement is. So we it, during my process of buying the business, we had a very large period where I had, uh, quite a few calls and arguments about bringing my salary from the high six figures or high Well.
High a hundred thousands. So it was like I was making [00:43:00] 170, 180,000 in my W2, and they weren't going to, they weren't going to let me, even though we were living well below our means, we're moving from California, Napa, California, which is a high cost area to Tennessee, which is a generally a lower cost area, and they wouldn't accept the fact that I was going to move down to 110,000 salary, which I even went lower than that after because I just didn't tell 'em.
But point B. It was one 10 and I said, my wife still works. We have plenty of salary. Like there's, there's a lot here. But you would think that that was the end of the world. But that the, the additional 80,000 though, or the additional 90,000, whatever it was, uh, uh, requirement to a, you know, the business only did 700,000, top line, like 90,000 additional on top of whatever the, the old owner was, which was around that a hundred thousand mark.
Um. You, you couldn't, like the dscr R is like, you just can't do it because it's an extra a hundred thousand. That's one seventh of the entire loan in additional salary that I had to put in on the [00:44:00] books. Finally it came off, but the fact that, you know, somebody could have a conversation with you and you actually understand the reality, um, I is amazing.
So Love it.
Alan Peterson: Yeah. If that's the reason, Jack, the difference in the experience that what you had to go for through, you know, and, and the way I look at it is really based on something that. Is not talked about. It's another thing that isn't talked about enough in my view, um, on social media platforms and people that kind of talk about SBA as it relates to acquisition financing or expansion.
And that is that banks, you, it's the, it's the law of two masters, right? You've got the S-B-A-S-O-P non-negotiable. There is not a better business partner to the bank than the small business administration. There's those rules do not, you know? Yes, they're open to interpretation to a point. They're non-negotiables, most of the, the clear tenants.
Then you've got bank [00:45:00] overlay and every bank has their own rules and policies in place that they need to follow. And by no malicious intent, well-meaning people that do what I do and are great folks very often mistake their policy for SBA policy. So, you know, make sure that if you're working with, you know, any bank and that you're getting some pushback on something, doesn't.
Don't be afraid to interview them a little bit and say, well, is that an SBA rule or is that a X, Y, Z bank rule? You know, and we have, we don't have significant overlay as far as our policies go above the S-B-A-S-O-P. The only thing that we have that's an overlay is our minimum debt service coverage ratio, SBA.
That's not a deal I'm ever gonna tell you to do.
Jack Carr: I mean, that's awesome. I, I'm glad you brought that up because that's an extremely important thing that I tell people as well, is [00:46:00] I said, make sure that that's not a bank rule versus an SBA rule. Because a lot of times, um, bank rules tend to be a little bit more stringent, but they're also a little bit more flexible.
Can we, I. Can we do something to, uh, appease the risk here? Um, and, uh, some bankers will work with you and some will not. And so just making sure, once again, back to that partnership that you are working with a bank who is willing to be a partner in this. Not willing to just be a transactional item where you are a cog in a transactional wheel, if you will.
Um, but. I love it. I mean, that is, I think those are some great, great, uh, ways to position yourself is making sure that you get pre-qualified. And when, when in the process do you recommend that a searcher come and talk to you? Like, when should they reach out?
Alan Peterson: When they see an LOI that does something to their gut?
Okay. Now that seems a little over the top here, but I mean it when you see a target business. [00:47:00] That you really feel good about. That's when I get involved. So pre LOI. But post initial due diligence, feel the deal out a little bit. And another thing I would call out on that topic free, LOI deal review. I do them all day.
I have a team of people that support me. I can tell you if a deal works or not in 24 hours, if, if Kevin Bromberg shout out to my associate lender who's unbelievable. Uh, he's a former credit manager that I brought over from my old bank, uh, and they still like me. So thanks to them for being cool and Kevin for coming over.
But I mean, we, we, we bang these things through and we'll give you color commentary on things that we wanna drill on and that you should be asking the seller about. We're gonna say, Hey, did you catch on page 15 of the sim right after it says that the seller only works 20 hours a week from home and makes a million dollars from the beach and is still selling at age 40.
Um, that 40% of their work is to one [00:48:00] customer. Are those different purchasing authorities within one broader organization, or is this true concentration? You know, that's a basic one. Um, a more in depth one might be. The sim goes on and on about contracts in place. Is there a change of control provision here?
I mean, I assume that if you're pursuing an asset sale, then this is gonna trigger some changes. Are those contracts really yours post-close and, and how confident can we be on those? Those are the types of feedback that we're gonna give. And then we're gonna give you a, Hey, they're asking a million. It supports eight 50, here's some strategies that might make that work.
Um, and we, we deliver that generally in 24 hours. Um, 48 being the longest that we take on that. But we wanna get involved early. Um, and, and, and we don't want, I'll be honest though, you know, I do have folks that it's month, month 11, the stress, the mundane nature that cold emails to sellers, getting the brokers on board with you, all of this stuff.
It's starting to really [00:49:00] take a toll and maybe you've even left your W2 and you're burning through reserves. This happens. I work with these folks, but that doesn't mean you start shotgun blasting me biz buy, sell listings that have nothing in common. In regard to size, industry or geography, my brothers and sisters involved in entrepreneurship for acquisitions.
Yes, do not deviate. From your non-negotiables established in the beginning,
Jack Carr: ironically, bingo, that that's the same advice I give to say, Hey, if you're working with brokers or anybody like that, same advice. Don't shock and blast deals or ask questions about, Hey, this one, this one, this one, this one's a restaurant.
This one is a HVAC business and this one's manufacturing. Like you're way off. You don't know what you want. Come back when you know what you want and when it feels good and feels right and you're ready to pull the trigger. 'cause I mean, there's nothing that. That screams tire kicker like, Hey, I am zero idea what I want to do.
So awesome. I mean, a Alan, that is so [00:50:00] incredibly valuable. I don't, I really want people to, to understand that you just said that, that there is help from the bank to understand. Where this should go in or where this could potentially actually close at, as well as some strategy as well as, Hey, we sound, we, we saw some weird stuff on the CIM.
Can you take a initial look at this, this, and this? I mean, that, that's a partner inside your corner willing to work with you on how can I get this deal closed and how can I make sure it's a good enough deal for me? Um, that I don't think that, I mean, I've never experienced it with a, a bank, so I think that's an incredible opportunity for somebody to.
Um, work with you and rely on you guys for that. That's, that's really cool.
Alan Peterson: We love it. I
Jack Carr: mean, you've been in the industry. Is that something that's normal?
Alan Peterson: I don't know. I mean, my whole story, my whole SBA story is, is, is really abnormal bad time, um, compared to most of my peers, to be honest. Um, you know, I grew up, my family were entrepreneurs, right?
So I grew up around small business. Uh, in general. My, you know, best friends and my uncle, you know, [00:51:00] my heroes growing up, uh, owned Irish pubs in Northeastern Pennsylvania. Uh, and by the grace of God, my. We're not doing that. Al right. Uh, so shout outs, you know, to my mother. She's not with us anymore, but I know she's still kind of, you know, she's around in, in my view.
But, you know, she was like, dude, what are you do, like, you know, the family business, it's a bar. It's a cash only bar that you can still smoke cigarettes in, uh, that everybody is stealing from us and we have to work every weekend for the rest of our lives. Is that what you want? For yourself. And, uh, it was weird because up up until that point, I'd never thought about what I wanted for myself.
I think I, I think I just, I took a natural progression into what I thought would be, you know, what I ended up doing. But thank goodness, uh, it wasn't so, but yeah, I mean, my background is, is a lot different. I approached things a lot differently and not to beat my chest on. Because I do a lot of volume and I have a good support team that helps me throughout the process, it really allows [00:52:00] me to be objective as a value to my clients.
We don't need, I'm not gonna stretch on a deal you shouldn't do. That puts you. At a position that's too risky because, you know, my lease on my three series is late. Like, that's not like who, who you're dealing with. It's somebody that wants a long-term true partnership to watch you grow. Because I'm a spectator, you know, ETA is a full contact sport and I'm still in the crowd eating popcorn, but I got so much respect for the individuals, you know, like yourself, Jack, like your network, like the people around us.
Mutual friends of ours, and even to your listeners who have already making the hardest step, which is committing to, you know what? I'm gonna do this and dude, I'm gonna do something. I'm gonna leave great benefits at a great salary while I have young children or plans to grow my family. Sign a government guarantee [00:53:00] back personal guarantee for 3 million bucks.
And by the way, spend half my savings doing it. Those people are the people that get it done, you know, and it's a step, you know, my golden handcuffs are tight, but I really do admire the people I work with and I love watching host close and beyond and, and staying in touch kind of, and just keeping my eye on the industry trends as well, kind of what's going on.
I have a client that is in Texas, you know, I'll use my plumbing friends again. And you know, they identified they're gonna buy a router company because that gets them in more doors as they're looking to diversify away from the large commercial projects due to the cashflow, stress, and the inability to manage working capital, you've got a net 60 turns into a.
And it the, and it's the, it's the biggest developer in your geo geography. You're not gonna sue them. You're gonna wait. And payroll is still going to be due, right? So they're looking to [00:54:00] diversify and they're gonna get routers, like get to them in more doors. That's a cool little strategy. So when I heard about that, I called my friend Washington State, how you doing?
Hey, have you thought about this? Do you guys see that? You know, right? Everybody, but creates community. Right? Deal. Deal team.
Transactional, get there on SB. I hope it's me, but if it's not, I've got a lot of friends in the industry and can point you in, in a lot of good directions as well. If it's not a deal for me, I always know where to put you, um, because of my vast network.
Jack Carr: Awesome. Alan, I'm, I I appreciate that. I think that that, so people should definitely take you up on that.
And if they want to reach you, um, where, where can they find you? I know we have. I'll plug it. Alan FI b.com. A-L-A-N-F-I-B as in first internet bank.com. [00:55:00] There's a interest form where you can reach out to Alan directly there, but if not there, Alan, where should other people, uh, see more content from you get updates, you know, social media style stuff.
Where, where should they head over to?
Alan Peterson: Well, I would say, you know, the best way to actually book a call or like a more formal meeting would be to use the Alan. That's A-L-A-N-F-I b.com. I use that because what that actually does is it'll integrate into my calendar. So that way, you know, I can make sure that we are at a great time where I can give you my undivided attention and handle any questions.
If you're more curious about what I do in the marketplace, or wanna look at some short form, form content that I haven't produced in three months, um, because I've been so busy and I'm telling myself I need to get back on the content train, I know it's important to give my message in, in the tone that I give it compared to a lot of the other noise out there.
Uh. Peterson, [00:56:00] S-B-A-A-L-A-N-P-E-T-E-R-S-O-N-S-B-A. Uh, that's on all platforms. So you know, that's a good way to kind of see some more info, some other stuff, see what I'm about. And if you'd like to learn more, remember you're not wasting my time. You know, very often I'll engage with folks that are just early on and they might not find the right target for some time, but I'd always advise.
You know, early to the party in acquisition financing for certain, and even if you don't wanna necessarily send a PS yet. Know that, that's totally cool with me as well. Um, you know, I like meeting folks in this space as long as you, you're really pretty serious and committed to going this route. I wanna talk to you.
If you're not sure, if you are ready to, you know, take the jump then hold off for now. You know, outta respect for both of our times. But if you've got that gut feeling and you are ready to go and you know, this just feels right and there's something [00:57:00] driving you to do this, you've got that passion. You've got that spark.
But you don't have a target yet.
Jack Carr: Mm-hmm.
Alan Peterson: Get on my calendar. Let's have a conversation.
Jack Carr: Awesome. Well, Alan, I appreciate the time today. This was so much fun. Like I said, I, I, I love talking shop much as yourself, and so this is always a great time, uh, for me. And I think that this is gonna be a huge value to the listeners.
So, um, I, I really do appreciate it. And if you like what you heard today, blah, blah, blah, the total spiel, give us five stars. Go over to owned and operated.com. Better smash that, like, and subscribe. Comment, subscribe, do all that stuff because I'm extremely good. Uh, YouTube personality, I have a mustache. If, if you are listening, there's a jack with a mustache, you, the, the, um, I'm sure the thumbnail for this will just be absolutely wonderful.
It'll be just outlandish, but, uh, we'll see. So I appreciate you guys. Have a good one and, uh, thanks [00:58:00] Alan.
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