Getting a small business deal done last quarter took more number crunching than usual.
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Small businesses are still changing hands, but buyers became more cautious in the second quarter.
According to BizBuySell, an online marketplace for buying and selling businesses, the number of transactions declined about 4% compared to the same period last year. Buyers are concerned about higher interest rates, tougher loan rules, and overall economic stability. With fewer businesses selling, the median sale price also fell by 6% on a year-over-year basis to $352,000.
Still, BizBuySell says the pool of buyers is still growing as more people look to escape corporate life, viewing small business ownership as a path toward greater autonomy. Nearly half of all buyers last quarter claimed to be “corporate refugees,” up from 36% last year.
Despite this steady buyer interest, the time it took to sell a business jumped.
Businesses stayed on the market for about 12 days longer this past quarter, reflecting heightened caution and more thorough due diligence on the part of buyers. That almost certainly has to do with the Trump administration’s tariff push, which began to take shape on so-called “Liberation Day” on April 2nd.
Further complicating matters are the new, tighter lending guidelines from the Small Business Administration that went into effect in June.
Obtaining SBA loans, a common way to finance small business acquisitions, has become more difficult. Recent SBA rules require increased documentation, tighter scrutiny of valuations, and a minimum buyer equity contribution of 10% (a seller note can now only cover half of this requirement). These changes particularly impact first-time buyers who may struggle to meet the higher equity requirements.
Still, certain sectors remain robust. Service-oriented businesses, including healthcare, construction, and home services, continue to attract buyers due to reliable, and, possibly, tariff-resistant earnings.
Not all sectors, though, are following the same healthy trend. Manufacturing businesses saw a 28% decline in transaction volume and a 7% drop in median sale price. That may note bode well for the Trump administration’s push to bring manufacturing jobs back to the U.S.
Given all the current economic and tariff uncertainty, the numbers in this report are hardly alarming. But the small business market often lags behind broader economic shifts, and it may take some time to catch up. Whether it’s a perfect comparison or not, the stock market has already shaken off its tariff jitters and is back at all-time highs. With further clarity on tariffs, and, perhaps, a coming interest rate cut from the Federal Reserve, small business valuations and deals may see their own bounceback in the third quarter.
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