ü        Reasonable price and terms

ü        Financial leverage

ü        Discretionary Earnings (DE)

ü        Furniture, Fixtures and Equipment (FF&E)

ü        Transferable lease

ü        Training after the acquisition

ü        Good appearance

ü        Covenant not to compete

ü        Understandable reason for the sale

ü        Dealing in a timely manner

SELLER FINANCING

When contemplating the sale of a business, an important consideration is how much of the purchase price you would be willing to finance for a qualified buyer. The reason is simple: “all cash” buyers for businesses are rare and, in most cases, it does not make economic sense for a buyer.

While sellers interpret financing as risk, statistics do show that sellers receive a significantly higher purchase price if they decide to offer some form of financing on the sale of their business. With reasonable terms, the chances of selling increases and the time period to sell decreases. Seller financing communicates to the buyer that you are confident in the ability of the business to retire its own debt and in simple terms, “pay for itself.”

If is important not to forget the risk involved with the Seller Financing, but the risks are diminished if the due diligence process is transparent and the buyer is qualified.

Seller Financing offers many advantages that, when carefully considered, may outweigh the perceived satisfaction of waiting for an all cash transaction.

ü       Seller financing greatly increases the chances that a business will sell

ü        Offering financing terms usually commands a higher price

ü       Interest on the seller financed portion of the transaction can significantly add to the total proceeds received for the sale

ü       Interest rates on seller notes are higher than rates given by banks if the same capital was placed in your bank account or in certificates of deposit

ü       Positive tax consequences compared to an all cash sale (check with your tax professional)

Whether you are financing the majority of the debt, or just a portion of the down payment needed for the buyer to qualify for bank financing, there are many ways to structure a Seller Financed transaction. VR Intermediaries are skilled in transaction financing and provide Valued Representation throughout the entire sale of your business.

SBA FINANCING 

SBA financing offers buyers attractive financing terms and interest rates while eliminating or reducing the need for the seller to carry a note. This can mean a lower down payment and lower debt service costs for the buyer. Both of these factors make your business attractive to buyers.

SBA Financing Benefits:

ü        Reduces and sometimes eliminates the need for a seller note

ü        Lower down payment and increases the number of prospective buyers

ü        Lower debt service creates higher net income for buyer

ü        Typical loan term is 10 years

SBA financing can be very desirable to a buyer, but for a variety of reasons, not all businesses will qualify for a SBA loan. VR maintains strong relationships with top SBA preferred lenders in the United States. Your VR intermediary will work closely with you to present your business in a manner acceptable to SBA lenders and advise you on the lending requirements.

Unexpected surprises cause buyers to evaluate whether or not to move forward with the acquisition of your business. If the facts are disclosed in advance, almost any problem or concern can be dealt with and solved during negotiations.

Be prepared to disclose…

ü        Any changes in earnings or revenue

ü        Tax payments that are in arrears

ü        Problems with the landlord or lease

ü        Loans and registered liens against the business

ü        Equipment leases

ü        Compliance with zoning and health regulations

ü        Pending litigation

ü        Loss of major customers

ü        Change in availability of suppliers 

INDEPENDENT BUSINESS VALUATION

Independent third party valuations are very useful tools in negotiations with buyers as they justify the price and value of a company. The independent valuation can also aid in expediting loan approval for the buyer’s financing. Though useful, they are not necessary for every business. A general guideline to follow for considering a third party Business Valuation:

ü        The business has sales over $1 million

ü        Your company is in an industry where high earnings multiples (high values or premiums) are common

ü        You are involved in a divorce or partnership dispute

ü        The company needs a valuation for a trust or ESOP (Employee Stock Option Plan)

Benefits of a third party Business Valuation include: 

ü        Preservation of the offering price

ü        Simplification of negotiations

ü        Buyer confidence in the true value of the business