The Issues with Selling Your Business in the Age of COVID-19

April 19th, 2023, 7:00 AM

The pandemic and the overall state of the economy have led many business owners to consider selling their businesses. However, there are a few major issues that have emerged since the pandemic that are making it difficult to close deals. In this blog post, we will explore two of these issues and discuss how to navigate them. We'll also highlight one significant opportunity for buyers in the current market.

Issue #1: Economic Impact Disaster Loans (EIDL)

One significant issue that has emerged in selling a business during the pandemic is the Economic Impact Disaster Loans (EIDL). These loans provided people with up to two million dollars with a 30-year repayment term. However, what many business owners don't realize is that this created a lien on the assets of the business. When borrowing this money, they signed what's called the UCC1 form, or a legal form that creditors use to secure an interest in a debtor's property. Therefore, you cannot sell your business without paying off that loan or getting the SBA's permission.


Solution: Pay off the loan or get the SBA's permission

To avoid any delays or surprises, it's crucial to pay off the loan or get the SBA's permission before selling your business. While it may not necessarily be a dealbreaker, it's essential to ensure that there are no legal issues or roadblocks.


Issue #2: Employee Retention Tax Credit

Another issue that has come up related to selling businesses is the Employee Retention Tax Credit (ERTC). The ERTC is a tax credit that was created as part of the pandemic, where businesses could get up to $26,000 per employee. The problem is that it takes a really long time to get the money, in some cases six to eight months. Business owners have been trying to exclude the amount of that tax credit from the business transaction, creating headaches and confusion, especially because the IRS mails out physical checks as payment.


Solution: Include the tax credit in the business transaction

To avoid complications, it's best to include the ERTC in the business transaction, or to wait until ERTC payment is received before going through with the business sale. This ensures that the new owner gets the tax credit and avoids any legal issues or tax complications. Be sure to consult with a professional to ensure that all legal requirements are met.


Opportunity: Willing Sellers & Buyers

While there are some issues to consider when selling a business during the pandemic, there is one significant opportunity in the current market. The COVID-19 pandemic has caused many people to reevaluate their priorities and future plans, leading to an increase in the number of companies for sale, as well as buyers in the market. If you're a business owner who's been considering selling your business, now might be the perfect time to do so. With many potential buyers actively seeking to acquire businesses, you have a unique opportunity to attract the right buyer and achieve a successful sale.


Solution: Proper Preparation & Guidance

To take advantage of the current market opportunity, it's important to properly prepare your business for sale and seek guidance from experienced professionals. This includes conducting a thorough business valuation to determine its worth and identifying potential areas of improvement to make it more attractive to buyers. It also involves ensuring that all financial and legal documentation is in order, including addressing any outstanding loans or liens on the business.

Selling a business during the pandemic comes with some unique challenges. By paying off EIDL loans or getting SBA permission, including ERTC in the business transaction, and properly preparing your business and seeking guidance from professionals, you can increase your chances of attracting the right buyer and achieving a successful sale in the current market. For more information about selling a business, the documents a buyer will require during the due diligence process, or how to prepare your business for sale, download our free guide now.

Get The Guide

Return to all Blogs

Have a
Contact Us

Message Us

By submitting this request for information, I agree that I have not entered into an attorney-client relationship and I am at this point only requesting information. I understand that I may only retain an attorney by entering into a fee agreement that will take place if and when it is determined that I have a lawsuit. Moreover, I understand that I will not be charged for a response to my questions set forth above.