Mainshares Resource Center

Mainshares has an ever-growing pool of resources to help entrepreneurs and investors navigate the nuances of small business transactions.

How to earn passive income from SMB ownership

Feb 10, 2024

With increased interest in SMB M&A, many investors are looking for ways to earn passive income from buying a business. This article outlines five approaches to passively owning an SMB as well as their pros and cons.

Comparing cash vs. PIK interest when financing a business acquisition

Jan 25, 2024

PIK interest refers to interest that is paid-in-kind vs in cash. It is relatively common in debt investments from private lenders and SBIC funds. This article outlines how PIK interest works and how it compares to cash interest.

Funding a business acquisition with equipment financing

Jan 13, 2024

For businesses with large amounts of equipment, buyers may turn to various forms of equipment financing to fund the deal. Equipment financing is backed by the equipment of the business and is a useful form of debt, if the deal is otherwise unbankable.

Depreciation recapture in a small business acquisition

Jan 11, 2024

When buying a business as an asset sale, there is often depreciation recapture due to the IRS. This post explains how depreciation recapture occurs, how to calculate it, and how it is typically handled when buying an SMB.

Using an F-reorg to purchase an S-corp

Dec 30, 2023

This post covers F-reorganizations, a common approach to selling an S-corp. It allows the seller to roll equity without being taxed on the roll, while allowing the buyer to received a stepped up basis on the assets.

Special purpose vehicles for SMB acquisitions

Dec 29, 2023

Many small business entrepreneurs form SPVs to acquire operating companies. SPVs allow entrepreneurs to shield their future investments and their own investors from the specific operating company.

Cash vs. accrual accounting in a small business

Dec 16, 2023

While cash accounting simplifies tracking cash movements, accrual accounting offers a more comprehensive view of financial health, making it the preferred choice for investors and lenders.

Calling capital for an SMB acquisition

Dec 15, 2023

For SMB acquisitions funded by investors, the entrepreneur will need to call the capital prior to the deal closing. This article explains the order of operations for funding an SMB acquisition and how to call capital.

Insurance requirements when buying a business with an SBA 7(a) Loan

Dec 14, 2023

Navigating the intricacies of an SBA 7(a) loan can feel overwhelming, especially when it comes to meeting insurance requirements. In this article, we discuss the essential insurances, from hazard and liability to worker's compensation and life insurance.

Equity call options: the right to buy out investors

Dec 2, 2023

Structuring an equity raise can be complex, particularly when it comes to setting the ability to buy out the investors at a future date. This article aims to explain the equity call option, a way for small business entrepreneurs to buy out their investors.

Off-balance sheet liabilities in a small business

Dec 1, 2023

Off-balance sheet liabilities refer to financial obligations and commitments that a company has but are not reported on its balance sheet. This post covers why these liabilities are important and how to diligence them.

Handling UCC liens in an asset purchase

Nov 18, 2023

One common worry is the status of the seller's assets, especially when it comes to potential legal entanglements like UCC liens. This post covers how to handle UCC liens in an asset purchase.

What goes into getting an SBA term sheet for an acquisition?

Nov 15, 2023

Getting an SBA term sheet is one of the most important steps after getting an offer accepted by the seller of a business. This post breaks down what goes into getting a term sheet for an SBA 7(a) loan.

A brief guide to private placement memorandums

Nov 7, 2023

Private Placement Memorandums (PPMs) are key disclosure docs used when raising capital for a small business. This post covers the typical outline, how a PPM is used, when it is presented and more.

Member-managed vs. manager-managed LLCs

Nov 3, 2023

The decision-making process and autonomy of the CEO depends a lot on how an LLC is structured. In this post, we break down the differences between member-managed and manager-managed LLCs.

Common structures for seller notes

Nov 1, 2023

Unlike SBA loans, seller notes can be structured in many different ways. This post breaks down common ways to negotiate a seller note to buy a business, including interest-only, balloon payments and stand-by clauses.

What is a Certificate of Good Standing?

Oct 26, 2023

A Certificate of Good Standing is often required by lenders, attorneys and investors during a business transaction. This post outlines what the certificate means and why it's required.

An introduction to Blue Sky filings

Oct 20, 2023

This post explains blue sky laws' importance, differences between states, when to file and how to maintain compliance when raising money for a business.

What are tax distributions?

Oct 13, 2023

Many small businesses with investors have provisions for tax distributions in their operating agreements. This post explains how phantom income is created and how tax distributions work.

Introducing Acquisition Targets by Mainshares

Oct 6, 2023

Find pre-qualified acquisition targets on the Mainshares platform. The full set of targets are updated weekly.

Bad actor checks under Regulation D

Oct 4, 2023

The SEC disqualifies bad actors from taking advantage of Regulation D to raise capital for small businesses. This article covers the key parts of the regulation, outlines the disqualifying events, and explains how to check bad actor status.

Comparing enterprise value and equity value in an SMB

Sep 30, 2023

Enterprise value and equity value are two important metrics for valuing and negotiating a small business acquisition. This post explores the differences, how to calculate them, and when to use which metric.

Understanding waterfall structures in a small business

Sep 29, 2023

A waterfall structure is a way to dictate how distributions from a small business flow to investors and management. This article covers common waterfall structures in a small business acquisition.

Buying a business as an asset purchase

Sep 24, 2023

With most SMB acquisitions being structured as asset sales, this article gives an overview of what an asset purchase means and how it impacts taxes and liabilities for the buyer and seller.

Understanding working capital in a small business

Sep 19, 2023

Although many small business sales are done cash-free, debt-free, working capital is critical to understand as a business buyer. In this post, we explain what working capital is, show how to calculate it, and how to ensure you’re covered.

Can an EIDL loan be transferred in a business sale?

Sep 18, 2023

Many small businesses still have outstanding EIDL loans issued during the pandemic. This leads to confusion over whether business buyers can assume these loans and use them as a cheap cost of financing.

Small business fundraising: 506(b) vs 506(c) offerings

Sep 12, 2023

Many self-funded searchers plan to raise capital to fund the purchase of a small business. This article explores raising capital through 506(b) vs 506(c) offerings under Regulation D.

Small business investing: cash flow vs. appreciation

Sep 11, 2023

Small business investors typically choose opportunities based on their ability to generate cashflow or increase in value. This post reviews investing for cashflow vs appreciation.

Buying strategy: executing a small business roll up

Sep 7, 2023

Small business roll-ups are becoming more popular as individuals leave private equity and look to buy Main Street businesses. This article explores this buying strategy and outlines tactics for rolling up SMBs.

How much does a quality of earnings report cost?

Aug 30, 2023

Many small business buyers are ordering quality of earnings reports during due diligence. This post reviews the purpose of QoE reports as well as their typical cost for a small business acquisition.

What is a full standby seller note?

Aug 29, 2023

With interest rates increasing, more seller notes on being put on standby. This post reviews full standby seller notes, why they are used, and their pros and cons.

Questions to ask when purchasing a small business

Aug 23, 2023

This guide covers the questions to ask of a business owner when considering acquiring an existing small business. Commonly referred to as "due diligence", these questions will help you determine whether the business is right for you.

The rise of acquisition entrepreneurship: a third path

Aug 22, 2023

The past few years has seen of surge of activity in people pursing entrepreneurship through acquisition: the process of buying a business instead of building one. This post explains what goes into ETA.

Seller financing in business acquisitions

Aug 21, 2023

This post covers how self-funded searchers and acquisition entrepreneurs use seller financing to fund the purchase of a small business.

What is a preferred return in a small business acquisition?

Aug 17, 2023

For acquisition entrepreneurs looking to raise investor capital to fund a business acquisition, the concept of preferred equity can be confusing at first. One common piece of any investor-funded acquisition is a preferred return.

Top books on buying a small business

Aug 16, 2023

A guide to books on buying a business. From Buy Then Build to the Messy Marketplace, these are the must-reads for acquisition entrepreneurs.

Taxes, loans and acquisitions: How outstanding loans are treated in a business sale

Aug 15, 2023

With many small business acquisitions being cash-free, debt-free, it's important for business buyers to understand how outstanding debt impacts a seller's after-tax proceeds from a sale.

Sources and uses in a small business acquisition

Aug 8, 2023

A sources and uses analysis tracks where funds will come from and how they will be used to close on a business acquisition.

Licensing requirements for buying an auto shop in California

Aug 3, 2023

This post dives into the licensing requirements to buy and own an automotive repair shop in California.

What is an equity step-up?

Jul 26, 2023

This post outlines how an equity step-up is used to calculate investor ownership in a business acquisition.

A quick guide to working with an attorney to acquire a business

Jun 21, 2023

Attorneys are crucial members of any deal team. This post outlines how to work best with your M&A attorney during an acquisition.

A brief overview of the world of independent sponsors

May 17, 2023

This post gives an overview of the independent sponsor model of business acquisitions and highlights the differences compared to private equity and self-funded search funds.

The best industries for buying a small business in 2023

May 8, 2023

This blog post explores the top industries for buying a small business in 2023, including business and consumer services, based on M&A activity and macroeconomic factors.

The pros and cons of buying an auto shop

May 2, 2023

The auto repair business is one of the largest industries in the U.S. This post highlights the pros and cons of buying an existing auto shop.

Licensing requirements for buying an HVAC business in Texas

May 2, 2023

This post provides an overview of the licensing requirements for individuals to purchase and operate an HVAC business in Texas.

The top self-funded search fund investors in 2023

May 1, 2023

This post highlights the top funds, syndicates, and angel investors for self-funded small and medium-sized business (SMB) acquisitions in 2023.

How long does it take to buy a business?

Apr 28, 2023

This post outlines the timeline for buying a business, including the phases and factors that affect how long it takes.

IOI vs LOI: Comparing an Indication of Interest and Letter of Intent

Apr 27, 2023

This post explores the differences between Indications of Interest (IOIs) and Letters of Intent (LOIs) in the context of business acquisitions.

How to find businesses for sale

Apr 26, 2023

This blog post outlines the various methods to find businesses for sale, including online marketplaces, networking and referrals, and direct outreach.

Types of loans to buy a business

Apr 25, 2023

This post discusses the various types of loans available for financing the acquisition of a small business, including SBA loans, home equity loans, seller financing, 401K rollovers, and personal loans.

Escrow agreements in a business acquisition

Apr 24, 2023

This blog post discusses the use of escrow agreements in small business acquisitions, and how they can provide a secure way to hold funds or assets until certain conditions are met.

Differences between a traditional search fund and a self-funded search

Apr 23, 2023

This post explores the differences between traditional search funds and self-funded searches for entrepreneurs looking to acquire small businesses.

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