If you've thought about buying an HVAC business, then you need to catch part two of this three-part series episode of the Trade Talk podcast. Brandon Bolen from Live Oak Bank and Patrick Lange from Business Modification Group are digging into the process of buying an HVAC business and answering the questions you may have if you're looking to buy. Make sure to listen in and don't forget to catch part 1 on selling your HVAC business.
In part 2, you'll learn:
- What is an SBA 7A loan?
- When to get a Conventional loan vs an SBA loan.
- What is the approval process and timeline look like?
- Will the bank look at my personal credit?
- When it comes to private equity - How do you compete with those out there willing to spend more money?
- What FAQs do banks get asked the most?
- Is it more difficult for a family member to purchase a business rather than an outsider?
- How do you go about a group buying purchase?
Connect with Tommy, Brian, Patrick, and Brandon:
Clay Hobbs and Brian Bohannan, JB Warranties
Patrick Lange, Business Modification Group
Brandon Bolen, Live Oak Bank
Read the transcript:
Brian Bohannan: Hello, everybody. Brian here with JB Warranties on another episode of the Trade Talk podcast. Today we've got part two in our three-part educational series. We've got the guys back, Patrick Lange from Business Modification Group, and Brandon Bolen from Live Oak Bank. Gentlemen, thank you for joining us again for part two. Excited to learn a little bit about what Brandon does today. For those of our viewers that didn't catch the first episode, would you guys mind introducing yourselves and informing our listeners a little bit about what it is y'all do?
Brandon Bolen: Yeah, I'd be happy to. I guess I'll go first. For those of you who don't know me, my name is Brandon Bolen. I'm the vice president for the service contractor lending team at Live Oak Bank. Really appreciate the opportunity to be on the Trade Talk podcast today with JB Warranties. I'm going to educate you on a little bit about who we are, but mainly what our product is and how your company can use it to grow.
Brandon Bolen: Live Oak Bank, we're a weird bank. Most banks have five branches in a geographic area and lend to any consumer or business, without really any specialization in any one product or any one industry. We're the exact opposite. We have one bank branch in North Carolina, but we lend in all 50 states because we have teams that focus on specific industries. Our service contractor lending team only focuses on HVAC, plumbing and electrical home service companies. It means we already understand exactly what your business is when you come to us. You don't have to educate us on it. It makes the process easier.
Brandon Bolen: We mainly focus on SBA 7(a) loans, which are Small Business Administration government guaranteed loans that allow us and other lenders ... I'll tell you a secret. We're not the only SBA lenders, so if you don't like me, you can go somewhere else. Essentially what it allows us to do is provide financing based upon the cash flow of the business, your personal credit and resume, which essentially your access to financing is greater with an SBA loan than it is with a conventional loan.
Brian Bohannan: Beautiful. Patrick, would you mind giving us your bio?
Patrick Lange: Absolutely. I'll jump in now. Thank you guys for having us on again, too. I certainly enjoy the opportunity to come talk to everybody. My name is Patrick Lang. My company is Business Modification Group. We specialize in the sale of heating and air companies around the country. I'll let you in on a secret. There's other people who do what I do as well, not many that I know that just do heating and air. That's something to do with the trade, certainly. If you don't like me, there's other places you can go to as well.
Patrick Lange: Once again, my company specializes just in heating and air. We're based in Florida and started in the Southeast, and then have expanded nationwide now. I actually sell more companies outside of Florida than I do in the State of Florida. We help people that are looking to retire or move on to something else in their life value their business, take it to market, and locate a buyer.
Patrick Lange: One of the things I say, the hardest part of my job is I have to tell everybody that your business is for sale, but not let anybody know that you're a business that's for sale. Everything we do is confidential. Most people don't want their employees or their competitors or their customers to know that they're for sale. We have to find creative ways to market, to bring top dollar in, release what the market is currently paying top dollar for a company. I'm fortunate to work with Brandon on a lot of transactions, and obviously a lot of JV Warranties' customers. I'm excited to be here and have an opportunity, hopefully, to contribute.
Brian Bohannan: Thank you, Patrick. Honestly, I've never even thought about that. You don't want your employees to know if you're shopping the business, and I've never heard that come up in conversation, to be honest. That is interesting. Those of you that caught the first episode, you'll know that we took a good look at what Patrick does in the acquisition, the marketing of your business and how to acquire. Today we're going to do a little bit of a deeper dive on the lending process with Brandon, how these projects get funded and the types of tools available as far as the loans. With that, you mentioned the SBA 7(a) loan. Do I have that right, Brandon?
Brandon Bolen: That is correct, the Small Business Administration's 7(a) loan program.
Brian Bohannan: Tell me, what is that? Because I truly don't know. I've never bought a business. How is that different from a conventional bank loan that you might pursue if you're looking to buy the guy down the street?
Brandon Bolen: Yeah, those are great questions. When we got into the industry about a little over two years ago, what we realized was that there's just a lack. There was no bank educating any business owner as to what they could use to grow their company, whether it was buying their real estate, working capital, or buying another business and what it would take. I liken it to, if you're a business owner and you don't know what an SBA 7(a) loan is, that's okay, because I'm a homeowner, and I don't know anything about an air conditioning unit except for what the tech tells me. If your local bank doesn't know what an SBA loan is and doesn't know how your company can use it, it's okay that you don't know.
Brandon Bolen: Being one of the top SBA lenders in the country, what we want to do is get out and educate people that essentially what a Small Business Administration loan is in the 7(a) program is that it's a government-guaranteed loan. The significance to you, the business owner, is that most banks are looking for collateral, right? If you want to buy another heating and air company for $1 million, there's probably no collateral there. They might have $100,000 of vehicles. Most of the value is in the good will, and your local bank might say, "Well, you have to have $1 million worth of equipment to secure the loan or put 30% down," which are high hurdles, and so they're going to say no. You actually don't get the loan to buy this other business.
Brandon Bolen: With an SBA 7(a) loan, the focus is on the cash flow of the business, meaning when you're looking to acquire a company, we want to make sure the profits can repay the loan. We really don't care about collateral, because the government's insuring the majority of the loan. We don't have to say you have to have $1 million worth of equipment. We can say yes, and you probably don't have to put any money down. If you're an existing business looking to expand that way, you're not going to have to put money down and the loan doesn't have to be fully secured, which means your access to financing, and ultimately a yes to grow your company, is greater than a conventional loan.
Brian Bohannan: Brandon, these SBA 7(a) loans, is this a result of the recent stimulus bills, or have these loans been around for a while now?
Brandon Bolen: The SBA 7(a) program is actually an annual program, where it's available every single year. It's not tied to COVID or anything like that. Now, PPP loans and EIDL loans are what brought SBA lending to the forefront of everybody's mind because every business pretty much qualified for a PPP loan last year, but this is actually their normal program. Rather than helping your business out of a hole, it's actually there for you to grow your company via acquisition and a couple other avenues.
Brian Bohannan: You mentioned I guess it was the conventional route, of having the 30% down or the $1 million in assets. What are the barriers to entry on this type of loan? Is it lower? What are they looking at as far as the approval process? What would one of our customers be going through? Is that something where they'd have to talk with someone like Patrick to find out what they're worth before they get the loan? Or is it a little bit more streamlined, using these with the government loan?
Brandon Bolen: That's another good question. When it relates to Patrick, I'd say most of the time when he's representing somebody, it's actually the seller. We work together a lot, right, where you have somebody who wants to buy a business and you have a seller who wants to sell their business. At the bank, our customer is ultimately the buyer, but Patrick's also representing a seller. You have a company that's looking to buy another company, that the seller's represented by Patrick.
Brandon Bolen: There's three things that we look at as the bank to say yes or no on the deal. The first thing is going to be business cash flow. Because we're not collateral-based, we want to make sure that either your business or the business you're looking to acquire are cash flow-positive and can support any debt, so that when we give you a million-dollar loan to buy this company, you can repay it. We don't want to put you in a bind where that business actually can't repay the million-dollar loan, because all of a sudden you're in trouble. That's first and foremost, is we want to make sure we review your financials and make sure that you can repay the debt, or the business you're looking to acquire can repay the debt.
Brandon Bolen: Next step is resume. Well, if you're a business owner of a home service company that's successful, that box is checked pretty easily, and then third is personal credit. Even though it's a business loan, we still do look at a borrower or a buyer's personal credit, generally looking for 660 and above, a solid PFS. The great thing is that you don't have to have a $2 million home owned free and clear to get a loan. That's not going to keep you from getting a loan, so you can have a modest personal financial statement and still be approved for an SBA loan.
Brian Bohannan: Is there a limit, or is there a threshold that you must cross to be able to have a bank interested in doing this? What is the typical-size contractor you guys are focusing on or that are using these loans? Does it range? Is there a different loan that you use if you're buying a $50 million company versus a $2 million company, or is it just you guys see it all?
Brandon Bolen: Yeah. As it relates to the sizing of the program, the maximum SBA loan amount you can get is $5 million. I'd say if you're looking to buy a company, there might be a $10 million company in sales out there that might go for five million bucks which you could qualify for. Typically, if you're looking to buy a company worth $50 million, the purchase price of that business is actually going to be too high, where you'd have to get a conventional loan versus an SBA loan. It'd be a completely different structure.
Brandon Bolen: As it relates to our average size, so I actually looked at the numbers, and with most of our SBA loans being for business acquisitions, the average purchase price ... or really the average loan amount ... is about $1.3 million. That means if Company A is buying Company B to expand, on average, our portfolio is paying $1.3 million to buy that business. That's about our average loan size, in terms of extending financing for acquisitions.
Clay Hobbs: To further question on that, you mentioned that most of the time, your SBA loans are used for company acquisition. What would a contractor use your SBA loan towards, other than that?
Brandon Bolen: Interestingly enough, when people think of a heating and air company and a plumbing company, they think of a truck, right? A lot of companies that are doing more than a million dollars in sales have their own business, like their own lease or their own property that they own. Just like any other brick-and-mortar business, a lot of times they like to buy their real estate that their company operates out of, because, one, they don't have to deal with a landlord, but it also provides an opportunity to build equity in that property.
Brandon Bolen: Then when you want to go sell your business and you go to Patrick and say, "Patrick, I want to list my company for sale," one, you can either sell your business and your real estate, or you can sell the business and you still own the real estate, which you can get passive income from forever to whoever bought your company. It's a twofold thing, but buying real estate for the business is one of the things we do, whether it's an existing property or buying land and building a 20,000-square-foot facility, as well as working capital or refinancing existing business to improve your monthly cash flow.
Brian Bohannan: That's interesting, because there are a lot of contractors I'm just thinking of off the top of my head who are leasing their space. You can use this loan to buy the building. Is that something that they would need a commercial real estate person for? Do you guys work with them to do that as well?
Brandon Bolen: I'd say most of the time they'll get a commercial real estate broker to help them with the purchase and drawing up the purchase agreement, but very rarely do I actually end up talking to that person. It seems to be a pretty ... like not an easy process, but especially if it's an existing building that they don't have to do any renovations to and there's no environmental concerns, unlike most banks or with a conventional loan, if you buy a building, they're going to ask for 20% down. If you're buying a million-dollar building, they're going to ask for $200,000 down, and you're getting an $800,000 loan.
Brandon Bolen: We're actually different. We don't ask for any money down because it's an SBA loan, meaning you can save your $200,000, and we'll give you a million-dollar loan to buy the real estate. You don't have to come out of pocket with that cash for that down payment. We know how important keeping your cash is for HVAC companies and seasonality. It allows you to expand without actually putting a down payment. It's a nice little product for buying real estate as well.
Brian Bohannan: Okay. A typical approval process, I'm sure you handle this daily. How fast could someone move if let's say they worked with Patrick and found out a good number to list the business for? They even might know someone that's interested in buying, which I would think would be common. These guys, they network a lot. A lot of these guys are friendly with each other. Let's say they may have lined up a buyer that's going to have to work with you to get approval. What does the process look like? How fast does it go? Any common items that disqualify?
Brandon Bolen: Yeah. I'd say overall, I'll talk about the overall process and timeline and what it looks like from a business perspective. Then I have two examples that highlight one type of customer and another, and one of them definitely involves Patrick very heavily in how the business transaction actually goes down.
Brandon Bolen: Overall, typically we send out an application to a prospective customer. If they turn it around and send me the documents back really quickly, if I can do the deal, I can send them a proposal letter in about a day, and then they can turn around and send that back to me.
Brandon Bolen: Then it goes to underwriting, which is where we do a little bit of deep analysis of the whole project. That takes about five to seven business days, and then the loan goes to our credit team for approval. Typically, from the time you get a loan proposed on and sent back into underwriting to the time it actually gets approved is a little less than two weeks, so it's pretty quick. You know whether or not you're going to get the money to grow your company.
Brandon Bolen: Then from there, if it's a business acquisition, you have to go into closing, which is where purchase agreements get signed if they haven't been signed already. We make sure insurances are in place, life insurance, all types of details I won't get into, and that typically takes about 30 to 45 days. If you're buying real estate, it's going to be about 40 to 60, just because appraisals and third-party reports can take a lot longer.
Brandon Bolen: That's the overall process. Typically, from proposal to funding on a really quick deal, you could look at 45 days. On average it's probably 60 to 90, just because you have a lot of moving parts and the seller might be taking a while, or a buyer might take a while or what have you.
Brandon Bolen: A specific type of situation that comes up a lot, which is another great reason to work with somebody like Patrick, is that Patrick has a connection with the bank. I think, as far as I know, we're the only bank that has a home services division. Patrick essentially pre-qualifies your business, saying it can be sold at this price. Then he'll go to us and say, "Hey, Brandon, I've got this really nice business in Florida. This is the purchase price. Here are the numbers. If we find the right buyer, will you be able to finance this business?"
Brandon Bolen: I'll go do the numbers in like 10 minutes, and I'll send it back to Patrick and be like, "Yes, we can absolutely do this," or we put a caveat in. Then the seller knows that their business, if they find the right buyer, can be financed. That means that they're going to get a big check whenever the loan closes from the bank, so that's one way to do it.
Brandon Bolen: Then sometimes, Patrick will find a buyer and he'll say, "Hey, Brandon, I've got this business I'm selling, and I've got a buyer. Here's the buyer's information." Or the buyer will reach out and I'll pre-qualify the buyer. Then all of a sudden, you already know that you have a business that's been pre-qualified to be sold, and now you have a buyer pre-qualified to buy the business. The loan process just takes off, because all parties are interested. Everybody knows that they can be financed.
Brandon Bolen: Then the other part that comes up ... and I can see this also happening a lot with your listeners ... is that this might be the first time they hear about an SBA loan. They might reach out and say, "Brandon, we'd like to buy real estate. We don't know what we qualify for." Or, "We'd like to buy somebody across town or in another county, but we don't know if we'd be approved." They'll come to us and essentially try to get pre-qualified, without something actually readily available.
Brandon Bolen: I can say, "Hey, you actually qualify for a building that's worth $3 million, if you'd like," and then they know that if a building comes in at $2 million, they can buy it and the bank will support them, so that they can support acquiring another company. That's typically how people will come to us and determine what they can or can't do from a financing perspective.
Clay Hobbs: It sounds like you follow the same process when you're buying a personal property or you're taking a mortgage out, and you go and get pre-approved or pre-qualified with a bank.
Brandon Bolen: Yeah, that's pretty much it, especially when it comes to real estate. When buying a business, I can say, "Hey, your current business is great." A lot of it's dependent upon the selling business, but it's pretty much, yeah, I can tell you with certainty what you will or won't qualify for.
Brian Bohannan: Well, we try to keep a good feel for what's going on out there. There's no denying the influx of private equity money into the space. It's a trendy market to be in. Patrick, is it even possible for somebody to compete against these guys that are overpaying? Any advice to the guys that just want to work with the guy down the street to work out a deal? Are they everywhere? Is private equity tracking every transaction that's out there? Can the smaller guys compete in this acquisition?
Patrick Lange: Yeah, absolutely. First, let me back up one thing. I just want to make a point of what Brandon said. I use Brandon as my secret toolkit. I can get a deal pre-approved with Brandon, so when a buyer comes to the table and I'm advertising a business, instead of saying, "You've got to come with $1 million," you've got to come with $100,000 or $200,000, depending on what the business will qualify for. It helps me sell businesses. If somebody is looking to sell, whether it's with me or on their own, Brandon's an incredible resource that they can go to ahead of time to get that pre-approval, or at least look at the numbers and say, "You need to clean this up, or you need to do that or you do this where we feel comfortable with it." That's the first thing.
Patrick Lange: Back on that, there's a huge push for private equity, and that's all that makes the news, I think. I probably get two to three calls a week from private equity firms, looking. The reality, in my opinion ... and Brandon could probably speak more on this ... but I think a lot of them ... it's going to offend people ... kind of spreadsheet themselves to death. They want to be in the space, they have a great plan of how to get into the space, and they never get into the space. I think private equity has absolutely driven prices up because of the threat of being there.
Patrick Lange: I think there are real private equity companies that are buying heating and air companies. I think there are real private equity companies that are backing other heating and air companies as they go on the acquisition journey. Most of them are looking for companies with $1 million in net earnings or EBITDA, depending on who you're talking to. The reality is there's just not that many of them that hit the market on a daily or weekly basis. They've lowered their threshold some.
Patrick Lange: On the smaller-size companies, that's where I see somebody looking to buy. A company that's making $200,000, $300,000, $400,000 net, to me, that's a sweet spot that I really enjoy working with, because often it's buyers who are operators who want to be in the space or expand the space, and it's sellers who are just good people. They've been in the business for 20 or 30 years, supported their family, supported their employees' families, been pillars in the community.
Patrick Lange: They have nice little businesses with what I classify as a lot of low-hanging fruit. Maybe they don't have JB Warranties and have offloaded that risk to something. Maybe they don't have a lot of maintenance agreements in place, or maybe they're not using Housecall Pro or ServiceTitan or some other CRM. There's a lot of little things in those businesses that I think a buyer can improve on and get a big bang for their dollar, and they're typically honest, great businesses.
Patrick Lange: To answer your question a long, drawn-out way, yeah, I think there really is. I think that there's certain markets that there's bigger presence and bigger buyer interest from a private equity standpoint ... Atlanta, Houston, LA, Phoenix, Arizona, these bigger metropolitan areas ... but there's still a lot of deals to be had. I probably do close to 20 deals a year on average, and maybe three of them are private equity. I'm sorry, go ahead.
Brian Bohannan: I just said that surprises me a little bit, but that's refreshing to hear, actually.
Patrick Lange: Well, it's because of the size. I'm not selling a lot of companies that do $20 million a year. That's just not really where I'm at. Not by choice, just there's not a lot of $20 million-a-year companies that sell. There's a lot of out-there, phenomenal companies that do $1 million, $2 million, $3 million a year in sales, and there's so many more of those to hit the market. It seems that's where I'm at.
Patrick Lange: I do companies with $5 million, $10 million in sales, but not a ton, and the buyer pressure at that point is so much higher. Everybody in the industry knows the big names in the industry that are acquiring. They're typically not buying a company doing $1 million or $2 million in sales, unless it's right down the street from another company that they already have or another brand that they have.
Patrick Lange: I think the private equity push is real, but not on these mid-level or smaller-level companies that I seem to do a lot of. I've got three deals right now, I think, at Live Oak that we're working on together. I think the average on those is probably $1.5 million in sales, maybe $2 million in sales. There's nothing I have right now that is at $5 million or $10 million. Private equity, the calls I get and the emails I get and so many other companies out there get, they're shaking the bushes themselves. Maybe giving sellers a false hope sometimes that they're going to get paid all these millions of dollars.
Patrick Lange: I joke about it, but nobody ever brags about the bad deal they got. You hear this talk about the 10X multiples or 20X multiples. Just before this, I was on a call with Brandon Jacob, who obviously is a pillar in the industry. We were talking about multiples together, and we're talking about this 10X multiple. I haven't sold one at a 10X multiple, and he hasn't either. We've been close, but you hear. Once again, nobody's going to call me up and say, "Oh, I got a bad deal." You know, it's not going to happen. Nobody's going to brag about that. I think there's a lot of opportunities out there for people who are looking for a business that makes sense for them.
Brian Bohannan: Very interesting. Well, guys, we're no longer on the contractor side, so we're not as close. Always assume that we don't know as much as our customers, but what are we not asking you that you hear a lot from contractors as far as the funding of these projects, the marketing, the availability? Is there anything that we didn't ask that you get asked frequently that's a good talking point here, that might be beneficial?
Brandon Bolen: I think, just for those listening, I know I speak a lot in bank jargon, so sometimes it might not come across as making any sense, but really what I'd say, without a bank loan, if you're a company that's doing $2 million in sales, you're 10% net profits if not higher, you've got a really nice company. You might have $200,000, $300,000 on your balance sheet in cash, that if somebody down the street wants to sell their company for $600,000, you don't want to use that cash. A conventional lender might say, "No, we can't give you a loan," but an SBA loan provides you the opportunity to buy bigger companies.
Brandon Bolen: Rather than what you thought, you could only buy the guy who has a truck, and you give him five grand upfront and you pay him commission on replacements from his customer list for three years, then it pays for itself, that moves the needle a little bit, but maybe a hundred thousand or a couple of hundred thousand in terms of revenue. Having a bank finance your acquisition means you don't just have to consider the company where it's just one or two trucks. You can look at that business that's doing $2 million in sales that's profitable, if a bank loan provides the cash for you to buy it.
Brandon Bolen: Your ability to expand your company and your net income is greater than when you have a bank financing it, especially because we're going to look at it and we're going to make sure the business can repay the loan. We're not going to put you in a difficult spot. It's a way to charge your growth and grow your company, sales, profitability, et cetera. Then when you look to sell, you're going to have a more valuable entity, and Patrick's going to know how to sell it and for what price. That's in a nutshell. I wanted to strain it down into what it is and what bank financing can help you do.
Patrick Lange: My two cents on that, I think the thing that doesn't get talked about a lot is succession planning. Kids work in the business and want to be able to acquire the business. Maybe mom and dad don't want their life savings tied up in this note that the kids are paying them, or you have great employees that want to take over the business. Brandon has opportunities and they have opportunities that they can finance those transactions. Take me out of the equation, or bring me into the equation to help them look at it from a valuation standpoint, but Brandon's there to be able to help their son or daughter or grandchildren or key technician who's been here for 15 years.
Patrick Lange: Brandon can put loan deals together. Obviously there's going to be requirements and things that they have to do, from income and expense and credit and all the other things. They still have to qualify, but I'll talk to people when they first come to me about possibly selling the business. I'll say, "Your kids or any family members? Do you have anybody that you think would be a perfect buyer that's already there? Let's start with them. Let's not go to the market. Let's not change things up. Let's start with that person and see if we can get them qualified," and we can sometimes.
Patrick Lange: What an excellent opportunity to keep a business, second generation or third generation. Mom and dad ride off into the sunset with cash in their pocket. They're taken care of. Now, instead of every day, dad calling son or daughter saying, "Where's my check," they've been paid, and they're paying the bank and financing it over 10 years, oftentimes.
Clay Hobbs: That's very interesting. This is unusual, and I've only been in the industry a little over five, six years, but it is unusual how many generational companies are out there, where we're going and sitting in their office and then here's grandpa, here's dad, here I am. Is that pretty common? Do you guys work with a lot of people trying to buy their parents out?
Brandon Bolen: Yeah. That's actually one of the easiest deals for us to get approved, because a lot of times the kid who's buying the company grew up working at the company. If you have somebody who can be a successor, it might be five years away, but it's good to talk to your bank to understand, because ultimately our customer is going to be the buyer. Although you've done a great job building a business that's valuable, we're going to cut you a check and you're going to be on the beach somewhere in the mountains somewhere. Our customer is going to be the buyer, that younger guy or girl who's worked at the company.
Brandon Bolen: You want to understand how much money do you have to save for a down payment, because if you're a first-time buyer, you have to put money down there, or can we do a partner buyout, things like that, and make sure your credit score's up. Talking to the bank to understand what would be needed if you want to buy a company is really important, even if it's five years away, because you might have to start saving now.
Brandon Bolen: Because I have people that call and they're the GM of the company, and whoever owns it has been gone for six years and they don't even run it. The person buying it took it from $2 million and now it's $6 million and they want to buy the company, but now the company's worth $5 million and they don't have 500,000 bucks or $250,000 to put down, because they just didn't think of it. They're wondering how they can get it done immediately versus two years. Making sure you plan, if succession planning is what you want to do, is super important, especially if you want to have a bank become involved.
Brian Bohannan: At JB Warranties, we're an ESOP. We've got employee ownership as of 2019. What does the process look like? It's different than an ESOP, but you mentioned a group of employees or technicians. Maybe you've got the plumbing manager and the air conditioning manager, and they want to go together or put a group together to buy this company. Is that a lot longer of a process to get all of the people qualified? How would they do that? Let's say you have like six or seven people in the business that have been there, that are tenured, and every business is going to change hands at some point. What's the process for a group, trying to put together an offer?
Brandon Bolen: With an SBA loan, anybody who owns 20% or more has to be a personal guarantor. If you have a group of six or seven people, normally two or three might be owning most of the company and doing most of the down payment. They might want to give 5% here and there. The people who would own less than 20%, we wouldn't consider the people as guarantors. We're not really qualifying them. We're just qualifying the ones who own more than 20% of the company.
Brandon Bolen: I'd say nine times out of ten, when we do individuals buying a business, it's normally two or three people, and we qualify them. Honestly, it adds maybe 15 minutes more to what I do, but it's also important, because you might have two really good partners and then you have one that's got a 400 credit score and three bankruptcies. I'm going to be like, "Hey, look, maybe make him a 10% owner, because we're probably not going to qualify." That's where you have to consider it.
Brandon Bolen: In terms of application, I've had deals where you have the GM and the install manager and they're both really qualified, they want to buy the company. I love to do that deal, especially if it's the one they work for. Or maybe they found one across town that they're like, "Hey, we know this guy has got a good business and he wants to sell, and we could do a lot better there. We're going to go buy it." We love to do that as well.
Brian Bohannan: Very, very useful information. I think the big takeaway for me today, just because I came into this honestly not knowing much about this, the takeaway for me is that it's doable. If you have a dream, there's a way to do it. You guys do nothing but talk with air conditioning and service contractors. I didn't know about all these options available for rapid growth. Appreciate you guys sharing your wisdom with us, as always. Brandon, I hope that people reach out to you. Patrick, I assume after the first episode, some people started reaching out to you, and we've just really enjoyed y'all spending time with us and sharing a little bit about what you do, but also how it can help our contractors grow, because that's what we're all here to do. Guys, appreciate it. Any closing remarks?
Patrick Lange: Yeah. Brandon, what's the best way, if people want to get that pre-qual process started?
Brandon Bolen: The best way is just to shoot me an email. My email is email@example.com, or my phone number is (910) 550-2858. Just give me a call and get the conversation started. Let me know what you're looking to do, and I'll know how to tailor everything to what your ideas are.
Patrick Lange: Great. Thank you.
Brian Bohannan: All right, guys. Well, we appreciate it. We'll see you back for part three, when we're going to discuss maxing out the value of the company and a couple of different ways around doing that. Until then, thank you. We'll see you soon, and that is the conclusion for part two of the three-part series on mergers, acquisitions and acquiring competition. Appreciate it, guys. Thank you.
Patrick Lange: Thank you.
Brandon Bolen: Thank you.
Vice President of Sales at JB Warranties