Tips For Selling Your Business #6

I have writen before on the subject of ”owner financing”, but feel it is worth mentioning again. We meet a good number of business owners that fall into the catagory of owning a ”Main Street Business”. Most of these  businesses we have listed are on the market for $1 million or less.

Recently, we have been working with some very capable buyers that I feel could really be successful in running a business. However, they don’t have a million dollars in cash for the purchase. The next logical thing they do is to go to their bank and try to borrow money . Our experience has been that buyers even with a good amount of cash for a down payment are not getting qualified for a commercial or SBA loan. The reason……. because the buyer and the business doesn’t have sufficient hard assets that are needed for collateral.

Even though a business has been growing and profitable through the down economy of the past four years, that hasn’t make any difference with lenders. The only people that can borrow money are those buyers or businesses that have sufficient collateral.

If you want to sell your business, the only other option is for you to agree to finance the difference between the down payment and the purchase price. This will mean that the buyer must have a good and acceptable amount of cash for the down payment, and you need to feel comfortable that the buyer will be successful as the owner.

There are many ways to structure seller financing, and we will talk about some of those in the next posting.