Business broker Orange County will make it easier for you to sell your business. However, if the buyer does not have the money to buy the business, chances are you will hit a brick wall or even have to lower your selling price to accommodate the seller. This is why even when you are the one selling the business; you have to learn of the different methods that buyers can to get finances.
As a matter of fact, one of the most important steps when getting your business ready for sale is to help with seller financing. More and more buyers and lenders are looking up to the seller for financing as they strive to get their transaction together. In this case, the seller holds a note at the agreed interest rate for the specific amortization or term. This ranges from 5 to 10 years. Needless to say, you need to involve business brokers Orange County in this process.
The term of the sale may include a balloon payment of 3 to 5 years after the purchase. This is a method used to give the buyer time to get the business up and running as well as to establish a successful track record.
The best thing about seller financing is that it makes the bank feel more comfortable when financing the transaction. The lenders will know that they have a seller with a vested interest in the success of the business and not one who will make money and run.
Another option that can be used is that of considering the Small Business Administration (SBA) lender. There are several loan options for you to pick from here. The SBA will guarantee you a portion of the loan. Here, the buyer is required to pay an SBA loan fee which allows him to get funding for the loan that the bank could not do conventionally. If the guaranteed loan is defaulted, the SBA pays the lending institution up to 75% of the deficit after they liquidate the collateral. Business brokers Orange County will help you evaluate your options when considering SBA loans.
This is based on an agreed dollar amount by the buyer and seller based on the performance of the business after the completion of the transaction. The earn-outs can be structured in many ways based on the various financial benchmarks like company’s revenues, net income or gross profit. This option is used in companies that are in turnaround situations or when the buyers are buying on potential rather than historical cash flow.
This is an alternative that a business broker Orange County will recommend if you are considering an acquisition or merger. The financing package can include interest rates of up to 30%. Lenders here are the high net worth individuals that are expecting large ROI. Limited collateral is needed hence the high interest rate.
There are many more financing options. Never make a choice in a hurry. Liaise with your business broker to know if the option is worth it or not.