One of the first questions small business buyer prospects often ask is, “How much money will I have to invest?”. And for most people, that’s really not possible. Why? Because we’re accustomed to financing just about everything – homes, cars, vacations homes, and even college for our children. And yet, when it comes to selling a business, many people are told that this is not an option.
Outside financing is usually available, but it’s less than 90 percent of small business sales that receive it. Seller financing is necessary in most cases because of this lack of availability. Certainly, some outside financing is available, but it’s not as prevalent as many sellers would like.
Many people don’t know that seller financing is a common way to finance the sale of a business when the buyer doesn’t have enough cash on hand or wants to avoid borrowing money at high rates in order to buy. This puts sellers, who want all cash and are not willing to finance the sale, at a disadvantage.
Seller financing is also often the only way to get a fair price for your business. If you are selling a business that is not doing well or has unorganized financial reporting, you may have to accept less than what the business is worth in order to find a buyer who is willing to take on the additional risk of the business.
Anyone who has started and built up a successful company knows about the value of hard work, ingenuity, and creativity. However, since buyers often do not have enough personal assets or collateral available to secure large loans from banks, many business owners turn to seller financing as a way to get the money they need to sell their business. By using the equity of the company, business buyers often seek a loan from the seller at a lower interest rate than they would be able to from a bank. This allows the business owner to maintain slight control of their company until it is paid off and also allows them to get a better return on their investment than they may be able to elsewhere.
Selling a business is never easy, and financing the sale can be one of the most difficult parts. Gulf Coast Business Broker can usually provide guidance in the overall financing process. And financing is often the key to the successful selling of a business.