So you've decide to sell your business, well you probably will have to become a banker. Why a banker, because more than likely you will have to finance most of the sale price. Ah, now you are confused, you thought that all buyers would pay you all cash or they could get a real bank to finance their purchase. The odds are over 90%, by some estimates, that you will have to carry at least a portion of the purchase price, via a loan, with no collateral. That can be real scary!
I don't mean to be the bearer of "bad" news but the facts are there. If you don't believe me ask a business broker. The word bad is in quotes because many people who carry part of the sale financing like the interest that comes along with the deal. It helps their retirement cash flow. That's good, as long as it is done right. If you are required to finance all or part of the sale of your business, be sure you do all or most do the following things and anything else that may be unique to your business and its industry.
Do they know how to Run the Business? - The more the buyer knows about the business the better chance that they will be successful and be able to pay you.
What Is Their Past Like? - Investigate the credit of the buyer; call their banker; speak to those who may have done business with them in the past. Find out as much about them as you can.
Should I Require Collateral? - If at all possible, get some form of security to allow you have something to sell if the deal falls apart. This may be real estate or inventory or accounts receivable or some equipment. Always get more than the amount of the loan. Collateral never seems to sell for as much as the purchase amount.
Should I Do Ongoing Monitoring? - You should have access to monthly or quarterly financial information. From these numbers you can see if sales are improving or not and if expenses are being controlled. Another thing you can do is to stay in touch with past large clients and suppliers. This way you will know how their service is and if they are keeping their payables current. It will give you a sense of peace or fright.
How Can I Keep My Good Name? - You may have signed personally for things like utility deposits or a building lease. Work to have the buyer replace your name with their name. Maybe even get your deposit money refunded.
Should I Work with a Lawyer? - Of course the sales agreement should be in writing. If you have to carry a note, be sure to get a signed promissory note and any collateral documentation necessary to secure your lien. You also may have to file the documents with a city, county or state office to make it valid.
Well this is not a complete list because every transaction is unique. Hopefully your lawyer has done this for others and will know what to do in your area and with the type of business you want to sell. Good luck.
Randal Roberts has over 30 years of commercial and international banking experience. He has helped more than 2,500 different companies with their businesses. He is willing to help you find the resources you need to start your own business or improve the one that you already have. Visit http://www.accelfs.com for more information.
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