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From the category archives: Certified Business Brokers News

Don't you wish financing a business could be easy? Well, keep these important tips and tools handy to have a smooth buying experience.

Buying Or Selling A Business? -- Is It SBA Financeable?

There is a general misconception in the small-business acquisition marketplace that a person could easily purchase any type of business through the SBA with a low down payment and get a loan for the rest. Most people also believe that SBA loans are a major source of small business financing. But data shows that SBA-guaranteed loans make up a small portion of the value of the overall small business lending market.

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You Can Purchase a Business Using Retirement Funds

Don't let your retirement dollars idle away! Put your money to work! Invest it in your own business and let your money work for you! You can use cash from your 401(k) or IRA account to purchase a business without incurring early distribution penalties, with no taxes, no loan repayment, and no hassle.For example, a Texas resident using $100,000 from a qualified retirement fund can keep the extra 31% that would have been paid in taxes, leaving an additional $31,000 to fund the new business by adopting a transfer trust plan versus withdrawing the funds outright.With the adoption of a pension transfer trust, you are allowed to convert 401(k) and IRA funds into privately-held stock in your new business. Pension and tax advisors can provide all the specific components necessary to make sure the transaction is in compliance with all applicable IRS Code Sections, ERISA Law, and Department of Labor Letter Rulings.We can refer you to reputable representatives. For more complete information on using qualified retirement ...

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Financing and Tax Implications of Selling Your Business

This is from an article by Mike Handelsman, General Manager of BizBuySell.com. Taking the time to research the financing and tax implications of a sale can provide you with a strong advantage come negotiation time. Before you can understand the importance of negotiating a final small business sale agreement, it pays to brush up on facts about how sales are financed and how proceeds are taxed. Why? Because every decision regarding the payment structure affects when and how money transfers from the buyer to the seller and how the payments are taxed. No one is asking you to become a financing or tax pro. That's what your sale advisors do, and you'll want to call on their advice through every step from here through to the closing of your deal and the transition of your business to its new owner. But knowing some basic information will help you understand the advice you're receiving from those who are trained and up-to-date on the legal, financial, and tax implications of small business sales. Thi ...

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Is Lending for Business Acquisitions Back to Normal?

This is the question I get more than any other and my answer is YES, Absolutely Yes!! My answer may surprise you, and some may even want to argue, but if you have been in the lending or business brokerage industry for more than 6 or 7 years I think you will agree.When I look back to the 1990's and early 2000's when I was asked, "What does it take to get a business acquisition loan?" I would tell them a borrower must be able to CONVINCE the lender of the following:The ability and willingness to pay all of their obligations on time.The specific experience needed to own and run the business.They had enough cash to make a substantial investment into the business.They had some tangible assets to back the loan should things go bad.Today when I am asked "What does it take to get a business acquisition loan?" I tell buyers and brokers exactly what I did 10 and 15 years ago.The trouble with many individuals today is they are sitting around waiting for things to get back to the way they were in 2007. Unfortunately, the ...

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How are Payables and Receivables Handled When Selling or Buying a Business?

While all transactions are as unique as the parties involved, in most small business sale transactions the seller keeps the cash and outstanding receivables. They pay off the bills and any other outstanding payables and deliver the business free and clear of debt to the buyer.In somewhat larger business sale transactions, there are many reasons why buyers consider acquiring the receivables.Purchasing the accounts receivable offers the buyer the advantages of having control over the collection of the receivables and continued cash flow from the business, thereby removing the need to acquire additional working capital.By acquiring the receivables the buyer immediately begins dealing directly with the most important element of the business - its customers.The sale of the accounts receivable also offers the seller a clean break from the business and the ability to cash out. This approach leaves no open-ended accounting issues after closing.Valuing the receivables depends on the future risk and resources necessary ...

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How Much Cash is Required to Buy a Business?

This is one of the most frequent questions we get from those who want to buy a business. Not all ask that question, however, but should.

Since most people only buy a business once in their lifetime, they do not know how much it would take to acquire a business that would fulfill their dreams.

So, how much liquid funds do you need to put a down-payment on a business and how much do you need to close on the deal?  A short answer to this question is this. Businesses vary a great deal in price and is down-payment driven.  The higher the amount of down payment you have, the more likely you will be able to find a business that meets your needs.


These are the two cash requirements to think about when you start shopping for a business.

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Understanding Seller Financing in a Business Sale

Business owners who extend financing to a buyer for the purchase of their business often ask, "What happens if the purchaser defaults on the loan?" Should that happen, the seller would be able to exercise whatever rights are defined in the security agreement that is associated with the promissory note. The seller would usually have the right to get the business back, which may not always be the best scenario if the business has declined under the buyer's management and is not performing well. In addition, if the buyer is using the business' assets to get a bank loan, the seller will have to take a second position behind the bank. A seller should try to negotiate a personal guarantee by the buyer as part of the terms of the promissory note. The seller can also require the new owner to provide periodic financial reports on the performance of the business as part of the terms of the promissory note.

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Valuation - The First Step Towards Selling Your Business

Just as an athlete might get a physical to determine their preparedness for a marathon, you should also measure your Company's fitness for the marketplace. A valuation is an unbiased examination of your company's marketability and helps you pinpoint where your company is in its business cycle. It is the foundation, the meat and bones, on which a business owner can base their readiness to sell.

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Earnouts - How and Why are They Used in a Business Acquisition?

An earnout is a type of payment agreement which is sometimes used in a business acquisition. Under an earnout agreement, the seller receives part of the purchase price up front, and additional funds over time. The terms of the earnout are written into the sales contract. An earnout can be used for different reasons: To tie the acquisition payout to future performance An earnout, in a business acquisition context, is an arrangement in which the buyer doesn't pay the entire purchase price up front but agrees to pay a certain amount now and more later depending on how well the business performs in the future. To bridge the pricing gap If there is a valuation gap between the buyer and seller, and there always is, it is a way to bridge the gap. The seller may be placing a heavier emphasis on the company's projections, and the buyer placing most of the company's value on its present and past performance. An earnout agreement is a useful tool to get the deal done. In an uncertain economic climate, the ...

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SBA Loans are Misunderstood These Days - Most Require Collateral

We get email alerts every other week or so from the SBA saying that the 7A guaranteed loan program for buying a business only requires a proven history of stable cash flow that can support the debt payments, which means that goodwill (an intangible asset) can be used as collateral. These SBA email updates also tout that banks using this loan will be backed by the SBA with a 90% guarantee. If the loan defaults, the bank would only be responsible for 10% of the default value, the government would cover the rest.However, this has not been the case in reality, just the opposite is true. Many banks are requiring a high-percentage collateralization of any SBA guaranteed loan in tangible assets such as real estate, equipment, inventory, and accounts receivable. The reason for this disconnect is that banks want more than just the government guarantee these days. They are being more careful and want more security.Many businesses do not have enough hard assets to cover a loan and real estate values aren't cutting it as ...

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