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Tags: deal structures, due diligence, SBA loans

Comments & Replies: 2     Views:     Post ID:     Comments About This Glossary Term

Typically, most businesses in the "small business" arena are offered including "all assets except for accounts/notes receivable, 'cash on hand,' and security deposits." Also excluded are "accounts payable." Buyers and sellers must be explicitly clear about what assets are included and, particularly, excluded from a deal.

Seller's may be particularly fond of "my computer," or "my office furniture," or "my company car"; but, if they belong to the business, they go with the business unless specifically excluded.

Another question that is raised is "what are the assets worth?" The usual and best answer I have is simple: "The worth of the assets is determined by the profits they generate." Nothing more, nothing less.

An asset is a piece of property or a resource that is controlled and designed to add value to the business that it is owned by. There are two types of assets called tangible and intangible assets.

Tangible assets include the physical assets of a business, which act as the motor that keeps the business running on a daily basis. Tangible assets can further be broken down in two categories called current assets and fixed assets. Current assets are comprised of the physical products and inventory that a business has produced to ultimately be sold over time. Fixed assets, however, as the physical items such as the business equipment and machinery that produce the current assets. These fixed assets are not sold like current assets, and are only sold when the business as a whole sells.

Intangible assets, vary from tangible assets as they are assets that don't take on any physical form. Examples of intangible assets include things such as any copyrights, trademarks, patents, and goodwill that a business may possess, that add value to the business as well. They are the ideas, the brands, the secrets, that implicate future value and worth to only the business that they are possessed by.

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