The purpose of these articles is to educate both buyers and sellers of the many different issues related to a business transfer. The subject matter includes things like the value of a business, the variables involved in a business transaction, financing and structure of a transaction, planning your exit strategy, etc.
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Tuesday, 10 April 2012
Dispelling the myth about seller financing
It’s probably not surprising to learn that the first question most business owners will ask is “How much is my business worth” , however, often times more sensitive to the seller are fears about “seller financing” the sale of their business.
A popular myth is that sellers should always press for an “all-cash deal”.The problem is Buyers will interpret this stipulation as a lack of confidence in the business, the buyer’s chance to succeed or both which can seriously diminish the chances for a deal.
A seller who wants to proceed in this manner should take a hard look at the benefits associated with seller financing….
Firstly, it increases the pool of prospective buyers.
Secondly, sellers will not have to discount their sales price.Also the interest on a seller financed deal can be substantial.
Finally, another benefit is due to low interest rates, sellers can get a higher rate from a buyer than they could from a traditional financial institution.
What sellers need to realize is that just like there are risks with owning their own business, there are risks with selling it.Similarly, just like they can minimize their risks when starting a business, they can also minimize their risks when selling it.
Securing the services of a good business broker to help the seller navigate through these issues can be good preventative medicine. Although there are no guarantees, a combination of recommendations from a qualified facilitator will structure the transaction to ensure that potential potholes are covered.
Do you have small business questions you would like answered about this article or others?Please visit www.VRWindsor.com or call 519-903-7807.
William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.