Qualifying to Purchase a Business
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Every Business Sale is Different
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Every business sale is different. There are always contingencies and variables which effect every transaction. However, there are some rules-of-thumb that provide a springboard for negotiations.|
- Many businesses are offered on a cash only basis. Financing will have to be arranged by the Buyer. More successful businesses frequently demand either all cash or that they be paid over a specific period of time with specificied interest on the unpaid balance.
- If the business purchase is financed by the Seller, the Seller usually demands a Buyer who can demonstrate a reasonable chance of successfully running the endeavor and who has at least 1/3rd of the total agreed price as a down payment.
- If the current owner is requested to provide financing for the sale of their business (the Seller "carries the paper"), the Seller will expect a reasonable rate-of-return on the portion of the sale financed. This rate is sometimes based on the Prime Interest Rate banks charge their most proven customers.
- Many businesses require additional expenditure by the new owner to update equipment, refurbish facilities, or embark on new advertising programs. Licenses may need to be transfered, training programs purchased, etc.
- The inventory may have to be purchased separately. Often this amount is determined effective the date of the sale.
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