The epidemic of corporate downsizing has made business ownership a more attractive proposition than ever before. As increasing number of prospective buyers embark on the process of becoming independent business owners, many voice a common concern: How do I finance the acquisition?
There are several options for financing and structuring a business acquisition. Our Professional
Business Intermediaries at VR located in Boca Raton and the Palm Beaches have expert knowledge in financing and can guide you to find the best possible financing solution, that in many cases can mean the difference between a successful transaction or a lost opportunity. It is important to have a financing solution that will serve the capital and cash flow needs of the business, preserve the lifestyle needs of the buyer while maintaining the integrity of the transaction for the seller.
Owner & Frank Feiler, Business Intermediary
Buyer's Personal Equity: In most small and mid-size business acquisitions this is a key element. Anywhere from 20% to 50% of capital needed to purchase a business comes from the buyer.
Seller Financing: One of the simplest and best ways to finance the acquisition of a business is to work closely with the seller. The terms offered by sellers are usually more flexible and more agreeable to the buyer than those from a third-party.
Seller financing greatly increases the changes that a business will sell.
Seller financing command a higher selling price.
Interest on the seller financed portion of the transaction can significantly add to the total proceeds received for the sale.
Interest rates on seller notes are higher than money market or CD rank rates. Positive consequences compared to all cash sale (check with your tax professionals)
SBA Financing: SBA Financing offers buyers attractive loan terms and interest rates while eliminating or reducing the need for the seller to carry a note. This means a lower down payment and lower debt service for the buyer, which translates into more net income for the buyer. Both of these factors make SBA financing attractive.
Often reduces the amount needed for a seller note.
Lowers down payment which increases the number of prospective buyers.
Lower debt service creates
Buyer’s Retirement Funds (401k or IRA): IRAs, 401(k) Plans,403(b) Plans, SEPs, SIMPLE Plans, Annuity Plans, Profit Sharing Plans, Defined Benefit Plans,457 Plans (govt. only), Cash Balance Plans, Money Purchase Plans, Rollover Plans ESOPs.
Most are not aware that the funds for purchasing a business with no debt, no penalties and no upfront taxes, are available right in their corporate careers retirement assets!
Valued Representation by your VR Intermediary will include exploring these and other types of favorable financing options available to you as a qualified buyer. During the buyer qualification process, VR will council you and help manage your expectations once an offer is accepted by the seller.