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- 2008 - December - 11th -

Deals abound, if willing to take chance

David Chapman

When business is bad, business is great.

At least that’s the gist of an old saying as it relates to the world of business brokers, according to Lee Panitz, a broker with Sunbelt of Jacksonville. The local outlet is part of the larger national Sunbelt brokerage network.

Business brokers act as intermediaries between business buyers and sellers and help facilitate a deal.

But the market down, business up adage isn’t exactly true, said numerous local brokers.

“During the bad times, very often people want to sell,” said Jerry Mitchell, a broker with Westbay Business Advisors, which works under Heritage Capital Group. “There’s a dearth of buyers, though. People are afraid to take a risk (by purchasing a business).

“To become an entrepreneur right now is extremely difficult, that is if you have the courage to do it.”

Panitz said that while his listings aren’t dramatically up, the quality of listings he is able to choose from has significantly increased. And while there aren’t as many people closing on deals, the activity is there, he said.

“We’ve actually been very busy,” said Panitz, “but people are scared, hesitating, sitting on the fence.”

Jerry Cofield, managing partner of the North Florida office of Corporate Investment International, serves as vice chair of education for the executive board of the International Business Brokers Association. During a recent national conference in Louisville, Ky., he said the discussion turned to factors affecting the business broker industry and the answer among the gathered was unanimous: it’s not a lack of buyers — it’s a lack of funding.

“We’re in the same boat as other industries,” said Cofield. “The available credit market has dried up.”

Cofield noted that just over a year ago, there were just under a dozen available lenders locally willing to provide loans. Today, many have dropped out or aren’t even taking loan applications.

The real estate downturn and unstable stock market have also been reasons for a lack of closings. Both Cofield and Mitchell noted that as recently as two years ago, many entrepreneurs were able to secure home equity loans and dip into 401(k) programs for funds to go toward down payments on business acquisition. Often, those options are no longer available due to home values dropping and 401(k) funds being depleted.

Additionally, Cofield attributes the changes to the Small Business Administration’s standard operating procedure harnessing available credit to the point of “almost choking.”

“It’s just not the same,” said Cofield, alluding to the state of business brokering. “It’s all about funding.”

Some brokers, like Panitz, secure funding through Pendarvis Capital Group, a lending company founded by Sunbelt founder Ed Pendarvis. Doing so, said Panitz, allows Sunbelt to avoid banks and the SBA.

Mitchell said credit availability, much like the stock market, will rebound when consumer confidence returns. It could be a little time, though, and he compares it to a pre-surgery pain alleviation technique.

“It’s like getting stuck with a needle that makes you numb before surgery,” said Mitchell. “You get the injection, but then you only gradually start to go numb.”

Though not an optimal situation for buyers or sellers, there is a silver lining to the situation. Cofield said understanding that it’s only a phase and realizing people will get through the “mess” is inevitable, so there is an end.

Mitchell said the tough times will make current businesses that do survive that much stronger due to competition inevitably having to close its doors.

Due to deals unable to be completed, buyers who have capital or are able to secure funding have the upper hand, said Panitz.

“The opportunities (of listings) are out there,” said Panitz. “You can get a very, very good deal right now.”

dchapman@baileypub.com

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