You can craft excellent memos even without prior experience by using our ready-made Memo Templates which you can edit and customize in Microsoft Word. These pieces of information may be about promotions, changes in procedure, and holiday announcements. Lenders, and the SBA, expect to see this table.Proper information dissemination is one of the prime factors that contribute to seamless operations within the organization. Memorandums are the primary professional tool in delivering information to all the employees. It minimizes the risk that you end up with a cash shortage at the close. This fee is passed on to the borrower.Ĭlosing Costs - These include lender packaging fees, attorney fees, appraisal reports.Ĭreating a comprehensive sources and uses table helps borrowers think through all the acquisition costs and ensures that those costs are matched with sources of funds. SBA Guarantee Fee - The SBA charges a one-time fee for providing the lender with a guarantee. A working capital line provides cash flow insurance and can help if the transition doesn't go as well as expected. Working Capital - Sometimes it makes sense to borrow an additional amount through the 7a/504 loan or through a separate working capital line. Lenders will want to understand these amounts because they help determine how much hard collateral is available and how much of the acquisition price is goodwill. Real Estate Acquisition Price - If the acquisition includes both the purchase of a business and real estate, make sure you know how much you're paying for both. Paying the seller is an obvious cost or use of funds, but there are several other transaction costs to factor into the sources and uses analysis.īusiness vs. One the important purposes of the sources and uses table is to make sure you've factored in all the costs of the acquisition. The sample Sources & Uses Table below shows the funding sources and uses for a typical small business acquisition which includes the purchase of a business and its owner-occupied commercial real estate. Read more about types of equity sources acceptable to the SBA. Sources or cash inflows include your own funds, gifts, funds from investors, seller financing, senior bank loans and subordinated/mezzanine debt. In the case of a business or commercial real estate acquisition, the "uses" or cash outflows start with the acquisition price, but also include transaction costs such as additional working capital needs, closing costs, legal fees, appraisals and loan guarantee fees. Having this information on hand demonstrates your financial sophistication & thoroughness.įor an SBA 7a loan, the SBA specifically requires the borrower “to provide a pro-forma balance sheet reflecting sources and uses of both equity and borrowed funds.” When you’re acquiring a business or purchasing commercial real estate, a sources and uses table is a helpful way of organizing all the cash inflows and cash outflows. Capturing all your cash flows in one table minimizes the risk that you end up with a cash shortage at the close.Īll lenders, banks and nonbanks, will expect a borrower to produce this table and to understand what qualifies as a ‘source’ of funds by the lender’s standards.
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