Business brokers Orange County are pretty common today. They help entrepreneurs satisfy the beautiful dream of business ownership. Even so, due to the lack of funds, some entrepreneurial dreams remain to be just dreams. The role of business brokers is to make business ownership a possibility. One of the ways they help with this is by offering numerous financing options. Here are the four main options you have when purchasing a business.
Some of the clients who contact business brokers already have the cash needed to buy a business. All they need is direction on the business to purchase. If you have saved up enough money for the purchase of a business, you can simply make a withdrawal. However, if your plan is to withdraw from your 401K, we caution you about the penalties for early withdrawal as well as the tax consequences. With the 401K option, a business broker Orange County will help establish a C-corporation and use the 401K to buy stock in your business. Using this method in commercial business sales helps avoid the tax implications of 401K withdrawal. A business broker can help you use the HELOC (Home Equity Line of Credit) for the business purchase. For this to work you need over 80% home equity.
Here you will be introduced to the conventional loan options which are rare and also to the SBA loan. SBA loans are loans guaranteed by the Small Business Administration. An experienced business broker will connect you with SBA pre-approved lenders. Even with the SBA loan option, you still need to raise a down payment of 10%. Your broker will also educate you on the changes to the SBA loan program.
This is the most common financing option. It is similar to bank loans only that you get the loan from the business seller. You will, however, need to raise at least 50% down payment and also deal with the interest charged by the seller. The down payment and interest rate are negotiable and a business broker will help you get the best deal. Seller financing is recommended in commercial business sales Orange County because the option allows the seller to have continued vested interests in the business. This means chances of the business failing are very small.
With this last option, private agreements are made between the buyer and investors. Investors can be your friends or family members. Your broker will help set the terms of ownership early to avoid any issues in the future.