How much cash do I need?
There are many things you will need cash for when purchasing a business. These can be separated into 2 main categories.
- The Down Payment – This is amount of money put up to show the business intermediary and the seller that you are serious about purchasing his company.
- Everything else – This sounds simple but includes everything that is not the down payment including closing costs, money to help you get started on a good financial footing, and money to pay all of the things you don’t think about.
- Operating cash
- Cash to Pay Credit Sales
- Utility Deposits
- Maintenance Expenses
- Lease Deposit
- Insurance Premiums
- Cash to Correct Code Violations
- Training Expenses (including traveling)
- Franchise License Agreement Training Fee
- License & Permits for State, County, & City
- Registration fees & License for Vehicles
- Sales Tax on Equipment Purchases
- Inventory Counting Service Fees
- Appraisal Fees
- Accounting Fees
- Attorney’s Fees
- Recording & Legal Filing Fees
- Escrow Fees & Closing Costs
Does an SBA Loan require collateral?
An SBA loan is a loan that is guaranteed by the US Small Business Administration. Often SBA loans require collateral, a strong credit score and clean background check. Most banks want more security than the government’s guarantee. Therefore, banks may require tangible assets such as accounts receivable, equipment, inventory, and personal real estate. We can help you identify the best bank for obtaining that SBA loan.
What Financing Options are Available?
Most buyers are getting financing through a combination of ways. These include:
- Friends and Family
- Seller Financing
- Qualified Retirement Funds
- Private Equity
- Earn Outs – payments made to business seller from future company performance
Why Do Sellers use a Business Intermediary Instead of Selling “By-Owner”?
- Business Intermediaries know how to sell businesses. Owners don’t.
- Owners want to preserve Confidentiality
- Owners want to focus on running their business
- Owners want access to the Business Intermediary’s database of buyers
- Business Intermediaries depersonalize the negotiation process
- Business Intermediaries prep the owner and business to sell
- Business Intermediaries will walk the seller carefully through the selling process
- Business Intermediaries help buyers find financing
- The owner has no experience with the complex process of selling a business
Should I Partner with a Business Broker/Intermediary to Buy a Business?
Yes, you should definitely work with a business broker to acquire your new business. However, the seller is the one that typically hires the business intermediary. The seller will pay the business broker’s commission and the business broker often has a duty and obligation to the seller. For a fee you can also retain a business intermediary to work on your behalf.
Using a business intermediary/broker does provide 3 things you cannot on your own.
- Business Intermediaries have business-for-sale listings and information on the business you cannot or may not have access to on your own.
- Business Intermediaries are a great buffer between you and the seller for bad news and negotiations.
- Business Intermediaries are experienced with the complex buying process, paperwork and are experts at getting the job done.
How do I help the Business Intermediary Help Me?
- Let the Business Intermediary know you are ready to buy. How quickly?
- Make a list of the kinds of businesses you are interested in.
- Give the Business Intermediary your personal financial statement/history.
- Inform them of how much money you wish to invest.
- Call them at least once a week to keep in contact and updated on your latest thinking