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Tips For First-Time Business Buyers

Leading The Way In Business Sales And Exit Strategies

Getting a good price for selling your business is useless if you can’t get paid for it.  In most of our transactions, sellers get paid in full at closing. It’s not a matter of simply demanding that the buyer pay in full at closing. Few buyers will want to part with that much cash to pay you in full at business closing.  Experienced buyers and financiers acknowledge that by borrowing a portion of the purchase price, they can increase their return on their investment.  It’s likely that if they have enough cash to pay for your business in full, they will look for larger businesses to buy. They will want to finance part of the purchase price from a lender, potentially even you, the seller. To receive a loan, buyers need good credit scores, a down payment, and enough business experience and expertise to convincingly show the lender that they will be successful operating the business.  A lender will review the business financials to see if there is enough cash flow in the business to pay back the loan, provide an income to the buyer, and a surplus for emergency funds. Lenders will review your tax returns to decide how much money your business generates.Lenders will look at how much you are compensated and the earnings of the business. They will look at other things such as discretionary benefits taken out of the business, interest on any loans against the business, or one-time expenses that the buyer won’t inquire.  We work closely with our clients to show buyers and lenders what the accurate cash flow of the business is. We work with several lenders that we refer prospective buyers to, and those lenders look for adequacies of cash flow in the business and don’t require collateral to back the loan.  These loans can often be approved quickly without many issues.

Contact us if you are interested in buying a business.

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