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Episode Summary
You’re thinking about selling, and you’ve got a deal in your head: an earnout to bridge the value gap, a consulting agreement so you stay close, maybe a few years on payroll while the new owner finds their feet. Then the bank funding your buyer says no to all of it. I sat down with John Thwing, known in Minnesota as The SBA Guy, who has closed over 400 SBA-financed transactions, to get into what banks actually fund when an owner exits. We covered the structural rules nobody tells you (no earnouts, no staying on as officer or employee, 12-month consulting cap, 75% loan max on deals with $500K+ goodwill), why fundamentals come before deal structure every time, and why the cash flow has to do three things before the lender even looks at the rest: pay the new owner, pay the debt, leave room to breathe. John also got into why family and inside transactions are the hardest deals he sees, why hiring an appraiser as step one is the wrong move, and what makes a buyer actually fundable. Real structures, real trade-offs, and the honest version of why your dream deal might not be the deal the money will fund.
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## Top 10 Takeaways- SBA doesn’t make loans. Banks make loans the SBA partially guarantees, which changes who actually decides your deal.
- Cash flow funds the deal first, the SBA guarantee second, collateral third. Not the other way around.
- Fundamentals before deal structure. No cash flow to pay the owner, the debt, and leave wiggle room, no deal.
- Earnouts, contingent payouts, and the seller staying on as an officer or employee are all dead inside an SBA-funded deal.
- Over $500K of goodwill, the bank lends 75% max. The rest is buyer cash and seller carry.
- Family and inside deals are the hardest, not the easiest, because no marketplace pressure has set value or terms.
- Hiring an appraiser first sends them into the woods without a map. Get buyer and seller to a number first.
- The bank fears the high-income, high-expense buyer who needs a giant salary from day one.
- Transferable skills usually beat industry experience, until the business is so specialized that the technician is the asset.
- A business sells easier once the owner has stopped being a technician and become a professional business owner. The Owner-Operator Trap™ in one sentence.
Sound Bites
“SBA is good at vanilla chocolate and strawberry. SBA is not good at Baskin Robbins 31 flavors.” (@00:05:30) — John Thwing
“For me the key issue is always fundamentals first, deal structure second.” (@00:08:45) — John Thwing
“These transactions tend to be the financial Super Bowl of both the buyer and the seller. And when you’re recruiting a quarterback for your financial Super Bowl, rate and term shouldn’t be your number one driver.” (@00:50:05) — John Thwing
“Some business owners over time go from being technicians to being professional business owners. Those are the businesses that are easier to sell and easier to transition.” (@00:48:56) — John Thwing
About This Episode
John Thwing, known in the Twin Cities as The SBA Guy, has been an SBA lender for 15 years and has closed over 400 SBA-financed transactions. Currently at Anchor Bank, he focuses on owner-user commercial real estate, business acquisitions, expansions, partner buyouts, and franchise financing. He’s a 15-year member of the Minnesota Commercial Association of Realtors, a graduate of the Carlson School of Management, and was recognized by C-LEVEL Magazine with a 2016 Champion of Business award. In this conversation, John walks through how SBA financing actually works, what banks will and won’t fund, and how owners should think about deal structure before they go to market.
Resources Mentioned
- John Thwing — The SBA Guy at Anchor Bank — Direct contact: SBAGuy@AnchorLink.com or (612) 505-9751
- Built to Sell / Value Builder System by John Warrillow — Referenced for the hub-and-spoke concept around owner replaceability
- The E-Myth by Michael Gerber — Referenced for the technician-to-business-owner framing
- SBA 7(a) Program — General-purpose SBA financing for business acquisitions, expansions, and working capital
- SBA 504 Program — Commercial real estate and long-term equipment financing
Connections
Phase + Module:
- Module 1 — Ownership Goals — What you actually want the exit to produce sets what deal structure can work
- Module 9 — Operator Transition — The transition the SBA is structurally designed to fund
Milestones:
- Milestone 6 — Transaction Value — What a bank will fund is one of the three lenses on value
- Milestone 25 — Operator Transition Plan — The seller’s role post-close is constrained by how the deal is funded
Concepts referenced:
- Three Lenses of Value — Owner’s, market, and transaction value — this episode lives in transaction value
- The Owner-Operator Trap™ — Technician-owned businesses are harder to transfer and harder to fund
- Value Gap — The space between what an owner wants and what the funding structure will support
- Normalized EBITDA — Cash flow after reasonable owner pay is what the bank underwrites against