One of the biggest misconceptions that potential buyers have when exploring the possibility of acquiring a business is that you need to risk 100% of your own capital. Fortunately, this is a faulty assumption. Getting to the heart of the matter, the two (2) most utilized financial methods to buy a business are as follows:
1. Small Business Administration (SBA) Loan: Uncle Sam guarantees a loan you get through a bank to buy a business. Here is how it works: You apply for a business loan with a bank to acquire a business. With your consent, the bank in turn contacts the SBA and informs them of your interest in getting a business loan to acquire a business. The SBA than does their homework on you and the business you wish to buy. If everything checks out, the SBA will guarantee a portion of the loan you received from the bank to buy a business. The benefits of an SBA loan is competitive interest rates and 10%-25% down payment at Closing making it affordable to buy a business. It takes approximately 90 days to close if utilizing an SBA loan.
2. Seller Financing: Essentially, the seller of the business becomes the bank. Example: The sales price is $250,000.00. You, the buyer, pays ½ down or 50% of the sales price at closing. The remaining amount is paid monthly, at an established interest rate (6% – 8%) over a certain length of time (45-60 Months). The advantage of this financing structure is the flexibility it brings on the financing terms versus the stringent bank loan requirements. You can also close on a deal within 30-45 days on average.
Both finance methods are the most utilized when acquiring a business. If it all possible, avoid utilizing 100% of your money to acquire the business. Instead try to finance at least 50%-90% of the purchase price, allocate operating capital for post-closing and have reserves for unexpected events.
Authored By:
Gil Sanchez, Esq.
Founder & CEO of Tempus Business Strategists, LLC
gil@tempusbusiness.com
Tempus Business Strategists, LLC (“Tempus”) is a Florida Licensed Real Estate Brokerage (License #: CQ1051910). Tempus is a Member of the Business Brokers of Florida (“BBF”), International Business Brokers Association (“IBBA”) and Alliance of Merger & Acquisition Advisors (“AMAA”).
—
About Tempus
Tempus #1 goal is to represent Florida business owners in selling their business for as much and as quickly as possible. We sell businesses from all industries. Deal size ranges from $50,000.00 to $20,000,000.00.
We also assist buyers to acquire businesses, business consulting and valuation opinions.
We market our listings confidentially to people and companies in the U.S. and around the world.
All buyers are required to sign Confidentiality Agreements and provide their own personal financial statements.
Our business brokers and business intermediaries will assist in providing a business valuation opinion, guide buyers for financing and take a listing from listing to close.
No upfront cost to hire us. We are paid only if we sell your business.
Contact us now for a free phone or in person consultation. 844-509-5778.
Tempus Business Strategists, LLC (“Tempus”) is a Florida Licensed Real Estate Brokerage (License #: CQ1051910). Tempus is a Member of the Business Brokers of Florida (“BBF”), International Business Brokers Association (“IBBA”) and Alliance of Merger & Acquisition Advisors (“AMAA”).
