There are numerous ways to get creative when it comes to financing a business acquisition and we all know the closing table is not the time to get creative. Buyers need to start thinking about financing even before they decide which business to buy and sellers need to think about it the moment they decide to sell. Sounds easy enough but most people put financing on the back burner.
In today's ever changing bank environment the days of showing up at the local bank and automatically being approved are long gone. Buyers will most likely need to approach multiple lenders and the process can be time consuming. A broker can help you get to multiple lenders at once and take a little of the burden off your time so you can focus on the many other aspects of purchasing a business. Buyers should expect the process to take as long as 90 days start to finish from the moment you submit your loan package. Be prepared to look at multiple options as well from SBA financing, equipment leasing to using your 401K to formulate part of the investment.
Sellers who have businesses where there is a significant amount of what lenders refer to as "goodwill" or "blue sky" can anticipate financing part of the transaction. Make sure you are capable of this future investment as may lenders will require this as a condition of their own financing. One can expect to finance roughly 20% of the goodwill portion of the purchase price. Seller financing is increasingly becoming a critical component to the successful completion of a business acquisition.
About The Author: Jonathan Smith is a financing/loan broker, consultant who assists with larger loan amounts ($500K to $5M) - SBA loans, conventional financing, and private lenders for business purchase financing. We works with business buyers, owner/sellers, business brokers, and agents. For assistance with business purchase financing options phone him direct at 888-859-9838.
Watch for more blog posts / articles from me in the future!
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