Rate of Transactions For California Business For Sale Offerings Rising In 2014, According to BizBen Index

August 7th, 2014

Dublin, CA (August 7, 2014)—California’s business for sale market posted 8,752 completed deals this year, through the end of last month, an increase of about 4.28% compared to the 8,393 transactions involving small and mid-sized businesses over the first seven months of 2013, it was announced by the BizBen Index monthly sales report. The company noted the growth in business sales this year slowed in July when the monthly deal count declined slightly to 1,306 from 1,327 transactions posted for July 2013.

“Overall, the market is in recovery as business purchase financing becomes more readily available and buyers and sellers become more optimistic about prospects for the economy,” said Peter Siegel, MBA, Founder and President of BizBen.com, parent of the BizBen Index. “The growth in the rate of small business transfers is mirroring broad trends in the jobs rate, home sales and other economic indices.” Siegel noted “the recovery is taking its time and is not consistent throughout the state.”

Among the state’s large counties showing increased business sales so far this year compared to last year are Contra Costa with 244 compared to 218; Kern, 209 vs. 179; Los Angeles, 2,357 vs. 2312; Sacramento, 331 vs. 271; and Santa Clara with 431 vs. 397.

Large counties showing year-to-date declines compared to last year at this time are Alameda at 355 compared to 399 last year; Fresno, 208 vs. 222; Orange, 889 vs. 916; Riverside, 374 vs. 420; San Bernardino, 372 vs. 417; San Diego, 766 vs. 776; San Francisco, 299 vs. 346; and Santa Barbara, 97 vs. 116.

July sales totals, by county, available at http://www.bizben.com/stats/stats-monthly-jul.php are as follows:

Alameda: 37, Amador: 3, Butte: 4, Calaveras: 1, Contra Costa: 24, El Dorado: 4, Fresno: 36, Humboldt: 3, Imperial: 1,Kern: 26, Lassen: 1, Los Angeles: 373, Madera: 3, Mendocino: 4,Merced: 1, Monterey: 20,Nevada: 3, Orange: 155, Placer: 10, Plumas: 1,Riverside: 66,Sacramento: 48, San Bernardino: 67, San Diego: 122, San Francisco: 19, San Joaquin: 16, San Luis Obispo: 12, San Mateo: 9, Santa Barbara: 15, Santa Clara: 65, Santa Cruz: 3, Shasta: 5, Solano: 13, Sonoma: 29, Stanislaus: 30, Sutter: 9, Tehama: 3, Tulare: 14, Ventura: 41, Yolo: 7, Yuba: 3

Sales totals posted by California county over the last ten years are available at: http://www.bizben.com/stats/stats-total.php

The BizBen Index has been collecting and reporting information about small California business sales for 16 years, to help business owners/sellers, buyers and the professionals participating in this market make informed choices and achieve success. The company recently launched the BizBen Network, the first nation-wide social network-powered Internet marketplace for small businesses. It is designed to provide a new level of support, with community-building interactive tools for buyers, sellers and professionals throughout the country engaged in small business transfers.

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For More Information:

Contact: Peter Siegel

Phone: 866-270-6278 or 925-548-1892

Retail Store Franchises For Sale: Are They A Good Investment?

May 12th, 2014

A retail store is defined as a business that will occupy retail space that sells products during specific hours that allow for ‘walk-in’ sales. Food and other service based businesses can also technically be considered as part of the retail industry. However, for our purposes let’s simply define a retail store as a business that sells products to customers. So, is purchasing a retail store a good investment? According to Entrepreneaur.com, only 10 of the top 50 franchises for 2013 are retail franchises. A retail store’s success is directly tied to the state of the economy. Retail stores can be expensive to run and face high competition. Let’s examine this further to help determine if buying a retail store is a worthwhile investment.

The Economy
Retail stores are directly affected by changes is the economy. When the economy is down, customers watch their spending very closely. Retail stores are the first to feel the effect of an economic downturn. It is currently forecasted, optimistically, that the number of stores opening is expected to exceed the number of stores closing this year. However, retail franchises of all sizes all will be struggling to remain successful, keep stores open, grow and come out profitable.

Expenses
Expenses for retail stores are relatively high as compared to other types of businesses.

Rents are high especially for those stores located in high traffic malls or shopping centers. Occupancy costs can range up to 18% of sales.

Labor costs for retail stores are typically 20% of sales. Labor costs include payroll costs, insurance and other employee related expenses. Retail stores are open for long hours, typically 10am to 9pm. Owners have to hire employees to staff the store if they plan not to work those long hours themselves. Owning a retail store is difficult for an absentee owner. It is extremely important that you have staff in place that is able to provide good customer service. Referrals are everything and a customer that has a bad experience doing business with you will be sure to tell all their friends causing you to lose potential business. You may have to pay more for quality staff.

Aside from high expenses associated with owning a retail franchise, you have to pay fees. Fees associated with owning a franchise include the initial startup fees as well as ongoing royalties based on sales. Fees vary by franchise. The Franchise Disclosure Statement discloses all fees.

Competition
Competition for retail stores comes from not only big box retailers and other retail stores but also from the Internet. It’s survival of the fittest. Those with strong brands, good marketing, excellent customer service, and accurate price points are able to survive.

Conclusion
In conclusion, a retail store is not a good investment at this time especially with the current state of the economy. The retail business is extremely competitive and is expensive to operate. There are other types of businesses on the market that can be purchased and operated with much greater ease.

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com, a website for businesses for sale, businesses wanted to buy, resources, & articles, and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

SBA Makes Changes To Their Loan Program

May 5th, 2014

The face of business financing has changed over the last several years. Lenders restricted their lending after the recession and have continued to be very cautious who they lend to. Only recently, as the economy has improved, have lenders started to relax their lending standards, but they are still being more cautious than they were before the recession.

The good news is that the Small Business Administration has made the process of obtaining financing a little easier. The SBA has implemented a couple changes in hopes of making the loan application process simpler and to give lenders more flexibility.

What’s New?

Two changes have been made to the SBA’s 504 loan program. They have eliminated the personal resource test, which is sometimes referred to as the wealth test. This test was used to eliminate applicants that did not have enough personal wealth. Previously applicants were required to use their own money to fund the businesses needs which meant that the SBA could reduce the amount of the loan they would back. Now applicants have more flexibility over how they manage their resources regarding the funding of a deal.

The second change is the elimination of the “nine-month rule.” This rule stated that applicants could only include expenses for a capital project that were incurred in the previous nine months prior to them submitting their application. The change to this rule means that a borrower can include expenses incurred at any time throughout the project. This gives a borrower more time to get their project off the ground.

The SBA made these changes in an attempt to increase the number of applicants that are eligible for financing. Since small businesses drive the US economy, the SBA is hoping these changes will help enhance job creation.

What Hasn’t Changed?

Aside from these two changes not much else has changed for a person applying for financing. Lenders are still cautious to who they lend to so getting a loan will still not be as easy as it was before the recession. With that in mind there are things you need to know if you are planning on applying for a loan in the near future.

Be Prepared

Just because the SBA has simplified the process that doesn’t mean you don’t have to be prepared. You should visit their site to learn about which loan programs are best for you. The changes I mentioned earlier only apply to their 504 flagship loan program.

You Still Need the Ability To Pay Back What You Borrow

While the SBA has made changes to make more people eligible for their loan products, applicants obviously still need to demonstrate the ability to pay back their loan. That means that they SBA won’t support anyone or everyone.

Have a Backup Plan

While the changes that have been made are designed to give people more access to capital that doesn’t mean you will automatically qualify. You should do research on alternative funding sources in the event that you do not qualify for a traditional SBA backed loan.

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com, a website for businesses for sale, businesses wanted to buy, resources, & articles, and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

Commercial Loans vs. Private Capital and Hard Money Loans: Which Should You Choose?

April 24th, 2014

An important part of buying a business is figuring out how to pay for it. Lenders are changing the way they do business which has fueled a demand for alternative financing opportunities. There are a variety of loan options available including commercial loans, private capital, and hard money loans. It is necessary to determine which type of loan is going to be the best fit for you. It is advisable to consult with a financing professional when trying to decide which option to choose. Let’s further examine the definitions of the different types of loans as well as their advantages and disadvantages.

Commercial Loans

Commercial loans are sometimes referred to as conventional or traditional loans. These loans are a debt based funding agreement between a borrower and a financial institution. Borrowers must go through a loan approval process when applying for a loan.

Private Capital

An alternative financing option is private capital. Private capital comes from an individual investor, a private capital group or an angel investor. This loan is secured with a contract or agreement and in some cases the investor is given a percentage of the company in exchange for their funds.

Hard Money Loans

Hard money loans are issued by private investors or companies. Hard money loans are asset based. The borrower puts up collateral in order to receive funds. The collateral is typically the value of their real estate.

Which One Should You Choose?

Trying to determine which type of loan is the right fit for your business financing needs can be difficult especially if you are going it alone. Going it alone can backfire and result in lost or bad deals. Due to my 25+ years in this business, I highly recommend working with a financing professional. A niche specialty loan broker will help evaluate your financing needs and make a recommendation that is based on their expertise.

If you are going to attempt to go at this alone, you need to contemplate each option and your evaluate your situation. Most borrowers get started by applying for a conventional loan and seeing if they get approved or not. If they are not approved they will then seek out alternative financing opportunities like private capital or hard money loans. Looking at one type of loan just because you did not get the other one is not always the best strategy.

There are advantages and disadvantages to each type of loan. Depending on the situation what may be an advantage for one person may be a disadvantage to another and vice versa.

Concerning conventional loans, one disadvantage to them is that you will be starting off your business in debt. A portion of your profits will have to be used to pay off the loan according to the payment schedule. Be sure to find a loan with the best rates and terms if you go this route.

Private capital and hard money loans are not readily available. However, with these types of loans you do not have to go through an approval process. The agreement is simply a contract between the investor and the business owner. Some may view giving up a percentage of their company as a disadvantage, but if you can find the right investor, one advantage may be that the lender can also become a mentor as they have a stake in the company too.

A disadvantage to a hard money loan is that interest rates are usually higher than a commercial loan and that is because the lender is taking a greater risk. Also, typically, hard money loans are designed as a short term loan solution.

In summary, each loan option has their pros and cons. I strongly suggest consulting with a professional to help you determine which type of business financing is the best fit for you!

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com, a website for businesses for sale, businesses wanted to buy, resources, & articles, and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

Selling a Franchised Business: What You Need To Know

April 11th, 2014

Selling a franchised business is slightly different than selling an independently owned business. When selling a franchised business there are key things you need to know in regards to preparation, approval, right of first refusal, fees and training. Details of what is allowed by the franchisor and what isn’t are located in the franchise agreement. I recommend reading your agreement thoroughly. Work with a business broker to help navigate the sales process and consult with the franchisor upfront about your intentions to sell. Following these recommendations will make you aware of potential challenges you could face throughout the sales process. It will also help you better assess potential buyers and ensure that you meet the obligations set forth in your agreement with the franchisor. If you are considering buying a franchise you should look into the details of the business before purchasing. That will help you choose a franchise with reasonable terms as well as let you know what you are in for when it is time for you to sell.

The key to a smooth sale of a business, be it an independent business or a franchise, is preparation. Let the franchisor know you are planning to sell and make the necessary preparations. Some franchisors will provide you with a checklist or guide which is useful in navigating the sales process. Also, working with a business broker is extremely useful as they will know how to get you through the sales process beyond what the franchisor provides.

Concerning approval, some franchisors will require that they approve a buyer. They will want to review a potential buyer’s financial status as well as their skill set and qualifications to ensure they are capable of successfully running the business and that their brand is in good hands.

A business broker will assist in the screening of potential buyers. They are experienced in the buying and selling of franchised businesses and know what to look for.

Another key thing to be aware of is the “right of first refusal” which means the franchisor can buy your business even after you have accepted an offer from a buyer. The “right of first refusal” clause can discourage potential buyers because they can go through the whole process of getting financing, doing their due diligence and making an offer, only to have the business pulled out from underneath them when the franchisor decides to buy it themselves. If this clause is built into your agreement, ask your franchisor if they intend to exercise their right to act on it.

In regard to fees, a new owner may be subject to a transfer fee. The fee is typically less than what the franchisee paid to purchase the business originally. However, potential buyers will want to know what the fee is.

A benefit to purchasing a franchise is that they usually come with tested standardized operation methods and procedures. When it comes to training, it is becoming increasingly common to have the exiting owner train the new buyer and that may also be expected by the franchisor. Check with the franchisor to know what is expected of you.

In summary, knowing what is in your franchise agreement and what is expected of you by the franchisor concerning preparation, approval, right of first refusal, fees and training will be important when selling your franchised business. Make the franchisor aware of your intentions to sell and work with a business broker to assist you throughout the entire sales process.

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com, a website for businesses for sale, businesses wanted to buy, resources, & articles, and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

Can I Get A Loan To Purchase A Business With Less Than Perfect Credit?

April 4th, 2014

Regardless of your credit score, getting a loan to purchase a business has become harder as lenders are more selective of who they lend to than they were before the economy crashed in 2008. A FICO score of 700 is the average lending threshold. For those with scores below 700 it can be difficult to obtain financing. However, it is certainly possible to get a loan to purchase a business even if you have less than perfect credit. However, it is important to be realistic about your situation and to take several steps to make yourself more appealing in a lender’s eyes. It is important to do your research, strategize, and be prepared and to structure a smart deal. Let’s examine these steps in further detail.

Do your research and strategize. Before you get pre-qualified know your credit score. You are entitled to one free credit report per year. If your score is low find out why and address the negative aspects to help improve your score. A specialty broker or business financing specialist can be of assistance as they know what lenders are looking for and they can provide you with advice on what you need to do to improve your score.

Certain types of businesses are considered high risk to lenders whereas others are seen as less risky. If you have less than perfect credit selecting a business that is considered to be less risky ups your chances of being approved for financing.

Be prepared. After taking the necessary steps to improve your credit score be sure to have an explanation for your score. Did you go through a divorce or have a family member fall ill? Although a good explanation will not erase a poor credit score it will help build credibility with a Lender.

Prepare a business plan. A solid business plan shows how you will run the business and how the business will make money. Essentially lenders want to have confidence that you know what you are doing and that you will be able to pay back the loan.

Structure a smart deal that is going to appeal to a financial institution. Lenders prefer to see deals in which the owner is also holding a note for part of the purchase price and offering training to the new owner for a period of time after the sale closes. This demonstrates that the current owner has faith that the new owner will be able to run the business successfully which will allow the borrower to pay back the loan. You may also need to be prepared to offer up collateral in order to secure financing.

Just because you have less than perfect credit doesn’t mean you can’t secure business purchase financing. Take the necessary steps mentioned above and consult with a specialty broker or business purchase financing expert to secure financing for your business purchase.

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com a website for businesses for sale, businesses wanted to buy, resources, & articles and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

The Pros and Cons of Buying A Gas Station

March 24th, 2014

There will always be a need for gas stations, regardless of the type of fuel they supply or may supply in the future. People are dependent on their personal vehicles to get to work and for other travel. These vehicles need fuel to operate and stations to dispense that fuel. Gas stations that are producing the highest profits have good locations and produce high volume sales. There are both pros and cons to buying a gas station. Let’s discuss some of them.

Pros

Demand

As previously mentioned, the demand for gas is there. People need to purchase gasoline regularly to fuel their vehicles so they can get to work, school, go shopping or wherever else they may need or want to go. Gas is a consumable product people need regularly. When the price of gas goes up people try to cut back their spending on other nonessential items. They may try to drive less or use public transportation but the way our country is set up with its highways, byways, thruways and freeways it essentially requires a vehicle to get where you want to go when you want to go. Some people view the ability to drive as freedom. We are a driving society and until that changes there will always be a demand for gas stations.

Alternative fuels are slowly starting to enter the market as a result of new developments from the fuel industry. But while the type of fuel we use may change in the future there will still be a need for fuel stations to dispense these new fuels. For the foreseeable future however, gasoline will still be the main source of fuel for almost all vehicles.

Additional Opportunities

Gas stations also can generate revenue by providing additional services like car repair and by selling convenience store items. If you find a gas station you are interested in that does not have either you may want to consider adding those options.

Labor and the Owner’s Role

Labor costs are generally low for gas stations because they do not require skilled labor unless you have an attached repair shop. Many gas stations are owned and operated by absentee owners although some do choose to work themselves in order to save on employee costs.

Cons

Competition

The largest con associated with buying a gas station is the amount of competition. Larger chains are dominating the market and pushing out independent gas stations. Retailers providing the lowest price fuel will get customers to travel to them.

Fluctuation

Gas stations are a relatively stable business model due to the demand for gasoline. However, fluctuations in the economy do affect customer usage and fluctuations in the purchase price of gasoline make it difficult to estimate profits.

Hours

Another con associated with buying a gas station could be the long hours. Many gas stations are a 24/7 operation. If you choose to be as well you will either need to work yourself, which requires a sacrifice of your personal time, or hire more employees to cover all the shifts which will eat into your profits.

In summary, the pros to buying a gas station include a steady demand for fuel, the ability to generate additional revenue aside from gasoline sales, and relatively low labor costs. The cons include high competition, possible long working hours, as well as economic and price fluctuations. In general buying a gas station can be a profitable business decision. But you should always consider the circumstances of any big decision and do your due diligence in order to make sure the pros outweigh the cons for your personal situation.

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com a website for businesses for sale, businesses wanted to buy, resources, & articles and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

Tips To Help You Sell Your Business Online

March 20th, 2014

Listing a business for sale online is the primary way that businesses for sale are marketed these days. Newspaper ads are a thing of the past because fewer people read newspapers and taking out an ad large enough to include all relevant information is just too expensive compared to the cost of an online ad.

You want to make sure that you create an ad that is going to grab the attention of potential buyers.  My advice is always to put as much information as possible into the ad. Make sure to include some financial information so when you get a call about your business from a potential buyer, that buyer already knows whether they are qualified to buy it and are not calling you just because they need more information about the business.

Here are 5 tips to help you create your listing and sell your business online.

1.  Drawing Attention To Your Ad

You want to draw a picture of your business starting with your ad’s headline so potential buyers know why they should buy your business.  Think of a catchy and descriptive headline that will grab the attention of potential buyers.  Most people are visual so make sure to include photos of your business as long as they don’t impact the level of confidentiality you’ve decided to keep.

Sometimes it is better to write your headline last.  By writing out the whole ad and then reviewing it you can look for things that jump out at you and use that information to write your headline.

2.  Be As Descriptive As You Can

You need to be as descriptive as possible about your business so buyers know exactly what you are trying to sell.  Include information about the history of your business, its current situation and the potential it has for growth in the future. ­­

You should add financial information as long as it does not impact your confidentiality. For example, people like to know how much they can expect to make a year on the business they are considering purchasing and how much it will cost them to purchase it.  You may also include such things as the number of current employees, any licenses that are required and anything else about your particular business that may be helpful to a potential buyer.

3.  Be Sure To Include Contact Information

This may sound like an obvious step, but you would be surprised how many people don’t include proper contact information.  You should give potential buyers more than one way to contact you. Don’t use the company’s phone number as you should be trying to keep your sale confidential at first.  Same goes for your email.  Creating a separate free email account just for the purposes of corresponding with potential buyers is something to consider.  Again, make sure you give potential buyers multiple ways to contact you as some people prefer to use certain forms of communication over others.

4.  Don’t Include The Exact Address

While I have stated that you should provide as much information as possible there are certain things you shouldn’t add. I stated above that you shouldn’t use the company’s phone number or email address as a way of communicating to potential buyers. You also shouldn’t include the company’s exact address in the ad. The reason for this is because you should be trying to keep the sale of your business as confidential as possible so you do not upset your employees, vendors and customers. Those people will have to be told eventually, but that information should come from you when the time is right and not from potential buyers wandering in and asking questions of your employees. Your business address is information that can wait to be disclosed until you are further into the process of the sale and the buyer has signed a confidentiality agreement.

5.  Consider Working with a Professional Business Broker

While you could use the information I have provided above and craft your own Business For Sale listing, I recommend hiring a professional business broker. Not only can a broker create the best possible For Sale listing for your business, but they can offer other services and information that will help you sell your business faster and for the best possible price.

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com (businesses for sale, businesses wanted to buy, resources, & articles) and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

What Will A Business Broker Do To Help Sell My Business?

March 10th, 2014

I cannot stress enough how important it is to find the right business broker to work with when buying or selling your business.  An important thing to keep in mind is not all business brokers are the same.  There are brokers that consistently go above and beyond and do whatever it takes to sell your business.  These brokers consistently close deals and because of that they receive referrals because clients are happy with the way they do business.  There are other brokers that do their job well but rarely go above and beyond.  Then there are brokers you should probably stay away from altogether.  They may lack experience, drive or simply just aren’t good at their job.

When you’re trying to sell your small business, you want the best possible broker you can find.  Your broker is going to be the one that fights for the best possible deal for you. Not only that, but a good broker will work to understand your needs and how to meet them. Here are four things a good business broker will do for you to help you sell your business fast and for the best price.   You should use this information when interviewing potential brokers.

Valuing Your Business

 A good broker should want to be a part of helping you value your business in order to establish a fair asking price.   The value you put on your company and the asking price you set can mean the difference between attracting potential buyers and selling your business in a timely manner.  A good business broker will understand how and have experience in determining the value of your business and they will also understand your local market.  A small business in one part of the country may not sell for as much as a small business located somewhere else. Understanding your local market is very important when setting the asking price for your business for sale.

Formulating An Exit Strategy

 Sellers that have developed a good exit strategy are more attractive to potential buyers.  If you have not thought about an exit strategy yet, you should start. A good business broker will help you through the process of formulating an exit strategy.  They will make suggestions on how to inform your employees and customers about the sale of your business.  They can also help you determine which employees you should train to do certain aspects of your job to help with the transition as well as any training you plan to offer the new owner.   Having these things in place will make your business that more attractive to potential buyers.

Marketing Your Business For Sale

 Marketing a business for sale is not the same as marketing a service or product.  A good business broker will know how to present your company to potential buyers and they will have access to information and connections that you will not. Marketing a business for sale is far more involved and complicated than many sellers realize. Bottom line, you should not try to market your own business for sale even if you think you have marketing experience.

Negotiating The Deal

 A lot of deals fall apart on the negotiation table. More than you would think.  A good business broker will have plenty of experience in the negotiation process and will not only fight to get you the best price, but will also work to make the deal a win-win for both you and the buyer. The last thing you want to happen is to have a deal fall apart during negotiations after going through everything you had to go through just to get to the bargaining table.

These are four important items that a good business broker will be willing to help you with if they want the fee for helping you sell your business.  You should use this information during the process of interviewing potential business brokers.  The answers to these questions will be a good indicator of how experienced they are and how involved they will get in the process. When it comes to hiring a business broker to sell your business you need to make sure that you have the best broker possible on your side.

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com (businesses for sale, businesses wanted to buy, resources, & articles) and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

Four Ideas For Getting Additional Funding To Buy A Business

February 17th, 2014

When an entrepreneur begins the process of buying a business, they will more likely than not end up discovering that they will need to acquire additional funds in order to complete the deal.The extra cash may be required for working capital, or possibly to contribute to the agreed upon amount that is to be put into an escrow service for the down payment.

Here are four ideas that can be used for raising that extra money you will need.

1. Using A Traditional Lender: The first place a buyer usually goes to acquire a loan to buy a business is a bank. A good place to start would be a locally owned bank. They may be willing to loan the money needed to purchase the business if the buyer uses that same institution to handle all their business banking needs. The competitive interest rates and the speed in which the application is processed will be attractive. However the buyer will most likely be required to provide a lot of collateral in the form of the assets of the business and a trust deed in the buyer’s property.

2. An SBA Loan: If the buyer is short on collateral but has experience with the type of business they want to purchase then an SBA loan may be an option. The lenders who work with the SBA make these kinds of loans because they are sure of being repaid as the SBA will guarantee a large portion of the loan if the borrower defaults. The buyer applying for an SBA loan will have to provide detailed information about their work history as well as the financial health of the company they want to purchase. The SBA has strict lending guidelines so the lending institution can be satisfied that the business will generate enough revenue to cover the loan payments.

3. Private Lenders: Using a private lender is an option. There are groups and individuals willing to lend money for business purchases. However, these types of loans are not as highly regulated as regular lending institutions. This means that the interest rates will probably be much higher and the amount of collateral the borrower will have to provide will need to meet or exceed the total amount of the loan. The borrower also may have to offer a second deed of trust in their home. The upside to these loans is quick turnaround from the application to receiving the funding as well as the possibility of getting funding for a deal that doesn’t fit the strict guidelines followed by SBA backed and conventional lending institutions.

4. Using a Retirement Account: You may not be aware of this, but the IRS allows a person to take funds from their retirement account and put it into a corporation for the purpose of buying a business. This normally isn’t something a buyer should do themselves however. They will need the expertise of a tax attorney or an accountant to ensure that the strict IRS rules regarding this kind of funding are followed properly so as not to incur a penalty.

These are some of the methods a business buyer can utilize to acquire the additional funds that may be needed to complete a deal as well as have working capital available to actually run the business. The buyer will want to seek the consultation of a financial advisor or a specialty loan broker to help with the funding part of the buying process.

About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com (businesses for sale, businesses wanted to buy, resources, & articles) and the BizBenNetwork Online Community. He advises and consults with business buyers, business sellers/owners, brokers, agents, investors, & advisors on a daily basis. Reach him direct at 866-270-6278 to discuss strategies regarding buying, selling, (or financing a purchase of) small to mid-sized businesses.

SBA - Small Business Administration