Is Now the Right Time to Sell or Buy? — How COVID-19 has Changed the Market

The global economy has taken a massive hit from the COVID-19 pandemic. Many businesses have been forced to shut down as the government places strict restrictions to curb the epidemic. Many small business owners are contemplating selling out to cut their losses, while the optimistic entrepreneur is wondering whether the situation is conducive for buying.

So, is now the right time to buy or sell a business? The answer to this question is not straightforward, as it depends on a variety of factors. Let us explore our options.  

Buying is Risky but Potentially Rewarding

Why would anyone consider buying a business at a time when millions of small businesses are closing shop? There are many risks involved, but the potential rewards are just as significant. Here are some reasons why you should consider buying at this moment:

  • Lots of Opportunities

It is estimated that more than 7.5 million small businesses will close down permanently if the COVID-19 pandemic persists. This means that about 7.5 million listings are likely to pop up in the foreseeable future. It also means that potential buyers will have millions of options to choose from.

The market is open and ripe for the picking. You can choose from a variety of industries and niches since COVID-19 has affected businesses across the board. This is an incredible opportunity since such options would not be available under ordinary circumstances. Ordinarily, it would be difficult to venture into some industries owing to high levels of competition.

  • Throw-Away Prices

You can buy a business now for a fraction of its ideal price owing to the ongoing pandemic. Most business owners would be willing to sell at a throw-away price instead of shutting down without salvaging anything. The influx of business sales listings has also kicked the law of demand and supply into action, so prices will continue falling as more and more businesses go up for sale.  

The ongoing devaluation of businesses is accompanied by a relaxation of the requirements associated with buying a business. This is partly because the government is implementing policies designed to make it easier for companies to operate amidst the ongoing pandemic. As such, you will save a lot of money and avoid the paperwork and other associated barriers.

  • A Brighter Future

The world is still trying to find a way to cope with the COVID-19 pandemic effectively. Some influential figures, such as President Donald J. Trump and many other politicians and corporate leaders, are pushing to reopen the economy. Scientists and researchers, on the other hand, are more cautious. However, everyone is optimistic that a solution will arise soon.

The economic setbacks caused by the pandemic are so severe that they resemble many of the characteristics of a recession. However, this is not an ordinary recession, as the International Monetary Fund’s chief economist Gita Gopinath explains.  

Many economists, including U.S. Secretary of Treasury Steven Mnuchin, believe that the setbacks caused by the COVID-19 pandemic will be temporary. This is because the economy, as well as the millions of businesses turning its wheels, showed a lot of potential and capacity for growth before the pandemic hit. As such, the economy is expected to pick up momentum when the threat subsides.

The authorities and other relevant entities in the economy are already exploiting solutions to the pandemic and economic lockdown. Many states are rolling out plans to reopen ‘non-essential’ businesses, and soon national and international trade will resume a sense of normalcy. As such, you will be poised to take advantage of the promised windfall once the economy reopens.   

Sell Only If Absolutely Necessary

Many small business owners are becoming increasingly frustrated as the lockdown persists. Some are worried that their business will not be able to make a comeback if the lockdown persists any longer, so they are considering selling.

Selling is a better option compared to closing down permanently, but it should only be done when absolutely necessary. Frustrated business owners should explore every avenue that can keep them afloat in the meantime. Fortunately, the government has rolled out policies to help struggle small businesses through the U.S. Small Business Administration.

The CARES Act provides about $376 billion in relief for small businesses and American workers. It also opens several funding options for struggling businesses, including:

  • Paycheck Protection Program

This program promises to forgive loans for businesses that do not lay off their employees — it is one of the many avenues the government is exploiting to protect American workers. It is an expansion of the SBA 7(a) loan program.  

  • EIDL Loan Advance

This program gives small businesses access to quick loan advances of up to $10,000 for temporary economic relief.  

  • SBA Express Bridge Loans

This program is applicable only by small businesses that already have a working relationship with an SBA Express Lender. It grants access to quick loans of up to $25,000 for temporary economic relief.  

  • SBA Debt Relief

This program offers small businesses with existing loans temporary reprieve as they cope with the pandemic.

Bottom Line: Make an Informed Decision

Don’t rush to sell your business or buy a new one. Instead, consider all factors and weigh each against the other. It is still uncertain what will become of the COVID-19 pandemic, which means that the future is uncertain. As such, be prudent and solicit the services of professionals.