• Why use a business broker?
• What affects businesses marketability?
• How can sellers protect themselves when financing a portion of the sale?
• What is the minimum down payment a seller should require?
• What role will a seller play after the sale?
• New Criteria For SBA Business Acquisition Financing
• Can BIZINESSBROKER.COM sell my business?

Why use a business broker? top
The process of buying or selling a business requires dedicated, professional attention. Marketing and facilitating a business transfer is a full-time job! You deserve someone who will work as hard as you do. Business brokers have a unique knowledge of the market based on their evaluations of many businesses. A qualified Broker will save buyers and business owners money by helping them to avoid costly mistakes, effectively marketing the appeal of the seller’s business, and maximizing exposure to serious, qualified buyers—all with complete confidentiality.

For example, ask yourself:

• How do you reach qualified buyers, possibly including competitors, without disclosing your intentions to sell?
• How do you evaluate your business objectively to ensure you receive top dollar for your investment and avoid costly negotiating tactics?
• How do you prepare and provide the information a prospective buyer will require to interest him or her in pursuing your business in favor of other options?
• How do you arrive at the best price and terms, including the intangible and goodwill values of your business?
• How do you maximize your favorable exposure to potential offers while minimizing your potentially damaging public exposure to customers, competitors, employees, and suppliers?
• How do you market your business in all of the appropriate markets, databases, and media efficiently, effectively and confidentially?
• How do you screen and pre-qualify buyers, determine their motivations, managerial capabilities, and financial strength?
• How do you effectively sell your business, diverting significant time, effort and resources to that process, while continuing to manage your ongoing business productively?

The answer is clear: The sale of your business demands a professional, just as running your business demands a professional. BIZINESSBROKER.COM has the expertise, tools, and connections to market and sell your business successfully. We work very hard to protect your business investment and maximize your net after-tax profit on the sale. It is to our advantage and yours to obtain the best possible price that a reasonable buyer will pay. We pledge to maintain high ethical standards and open and honest communications in all of our business relationships.
 
What affects businesses marketability? top
Most critical are price and terms. When a business is over-priced or the owner does not offer reasonable terms there will be few, if any, buyers interested in acquiring the business. When a business is priced realistically, and with proper terms, several buyers are likely to pursue acquiring the business. Competition among buyers creates higher selling prices. A buyer who knows he has other buyers competing for the business will be highly motivated to offer the price being asked to ensure he does not lose the business to another buyer’s better offer.

Secondly, the quality of the information provided to a prospective buyer is critical. When a seller has complete and accurate financial information that alleviates any doubt as to its propriety, a buyer can become much more conformable with the business and the terms. The value of the assets and cash flow generated by the business must be provable and verifiable.
 
How can sellers protect themselves when financing a portion of the sale? top
Sellers are always concerned about how they can protect themselves when they sell their business and finance a portion of the transaction. Listed below are several things sellers should consider to protect themselves for a worse case scenario:

• Background check—A buyer’s background should be investigated. Research should include credit reports, personal assets, work experience and personal references.
• Life insurance—Buyer’s can be required to maintain a life insurance policy with the seller as beneficiary.
• Additional collateral - If the buyer has a home with significant equity, commercial real estate or other investments, a seller can ask for those assets to used as collateral.
• Personal guarantee—A seller can require the buyer to personally guarantee the loan from the seller.
• Asset restrictions—Depending on the circumstances a seller may want to restrict the new owner’s acquisitions, expansions and sale of assets until the seller’s note is paid in full.
• UCC filing - The Uniform Commercial Code adopts the “notice filing” approach, under which an abbreviated notice is filed with the appropriate filing officer evidencing that a debtor and secured party intend to engage in a secured transaction using specified collateral as security.

What is the minimum down payment a seller should require? top
The down payment the seller requires may be more important to the successful sale of a business than the sales price. The size of the down payment, interest rate and length of re-payment all contribute to a successful sale. Over eighty percent of all businesses sold above $100,000 are sold with one-third or less down with the owner financing the balance. Asking for one-half down will reduce the price by approximately twenty percent. Asking for cash will reduce the price to forty to sixty percent of the one-third down payment price.

A buyer is trying to buy as much business as possible for the cash he has available for the down payment. When a seller asks for $200,000 down on a $400,000 value business, the buyer may well keep looking until he can find a $600,000 value business where the owner will accept $200,000 down and finance the balance. High percentage down payments cause buyers to discount offers. The business owner who asks for all cash will generally not succeed in selling the business because buyers know they can buy three times as much business for the same investment.

However, in all instances we do recommend a down payment. When a buyer has a serious stake in the business there is less likelihood the buyer will default if difficulties arise. Banks typically require 25-30% minimum down payment from a buyer to approve a business purchase loan. A seller should set the minimum down payment at least the same level.

Sellers also have expenses after the sale that should be considered in making the down payment determination:

• Taxes—sales tax, stock transfer tax, real estate stamp tax and other taxes due at the time of the transaction.
• Income taxes—substantial income taxes may be due on any gain on the sale.
• Loans—After-tax cash will be required to payoff any business loans not assumed by the buyer.
• Fees—appraiser, attorney and accountant’s fees, and any broker’s commissions.
  Regardless of the amount a seller may need when their business is sold, however, Beltway recommends that a down payment of 25-35% be required.

 
What role will a seller play after the sale? top
Unless the buyer has experience in the seller’s business, the buyer will probably want the seller to stay on for a short period while the new owner gets comfortable in the new business.

Except in the rare case of an all cash buyer, the seller is going to be tied to the business to some extent until the buyer retires the seller’s note. Not only is it fair for the buyer to ask the seller to advise and consult in the short-term, it’s in the sellers best interest to be available to help the new owner while he or she learns the ropes. It also might be the key that helps to sell the business faster and for more money.
 
New Criteria For SBA Business Acquisition Financing top
SBA has established new underwriting criteria for Business Acquisition requests. Therefore, when considering applications where any portion of the loan proceeds will be used to finance a change of business ownership, lenders will have to pay particular attention to determine that:

• The change of ownership is an arms length transaction,
• The lender, or qualified independent individual, determines the value of the small business, and
• The loan file is well documented regarding the valuation and includes the substantiating analysis.

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