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Buy/Sell a Business
I'd like to sell my business, what is the first step?
Whether you are considering selling, merging, or closing your business, an SBDC advisor can help you prepare an exit strategy before you actually need it. Where do you want to go with your business and what is your desired exit? If part of the exit plan is to sell your business, do you know what your business will be worth when you sell it? No matter what exit you have envisioned, proper planning will help you make the most of the transition and help to ensure that you realize the real value of your business. If you need assistance, contact the SBDC office nearest you.
Can I get financing to buy an existing business?
Your ability to obtain financing, such as a bank loan, to purchase a business depends on a variety of factors. These include your personal financial situation, the cash flow of the business, available collateral, business history and expectations for the future, and business purchase price. The lender will analyze the business, the borrower, and the structure of the deal to determine whether or not to provide financing. See our video, “Qualifying for a Small Business Loan”
What information should I request from the seller? What if the seller won’t provide any financial information for the business?
When deciding whether to purchase an existing business, you must thoroughly investigate the business and obtain information from the seller, including at least three years of financial statements.
You need accurate financial statements/tax returns for the business in order to make an informed decision about buying it. Should the seller tell you the business has unreported cash sales, beware! Inaccurate reporting to tax agencies is dishonest and illegal. Seller claims of unreported sales should never be counted to determine the cash flow of a business. These claims are unreliable at best.
When making a purchase decision, the buyer should rely on financial information which can be documented (i.e. tax returns, accountant-generated financial reports). Lenders only consider documented financial information and so should you. Be certain to request a Successors’ Liability Clearance Letter from the Idaho State Tax Commission to be certain the seller does not owe back taxes.
I’m buying an existing business that happens to be a franchise. Is there anything special I should know or consider?
You should obtain a copy of the franchise agreement and review it carefully. You should also determine if you’ll be required to pay the entire franchise fee, a transfer fee, royalty fees, or advertising fees. In most cases, the franchise will have to approve the transfer or sale. If you are seeking an SBA loan, it is important to determine if the franchise is one that is eligible for SBA financing. For more information, see the SBA Franchise Directory.
Can you help me value a business that I want to buy/sell?
Business valuation is one of the many ways our SBDC advisors can assist you when you are considering buying a business or franchise or selling a business.