How should the sale and financing of a business sale be structured? This is an issue that should be addressed early in the sale process. For most people, buying or selling a business is one of the most, if not the most, important business decisions that they will ever make. For this reason, it is vital not to wait until the last minute to structure your deal. Let’s turn our attention to the most significant questions you need to answer when entering the sale process.
1. What is My Lowest Price?
The first question you should ask yourself is, “What is the lowest price I’m willing to accept?” If an offer is made, the last thing you want is to be sitting around trying to decide if you can take a given offer at a given price. You need to be ready to jump if the right offer is made.
2. What are the Tax Implications?
Secondly, you’ll want to seriously consider the tax consequences of any sale. Taxes are always a fact of life and you need to work with a professional, such as an accountant or merger and acquisition advisor, to understand the tax implication of any decision you make.
3. What are the Interest Rates?
The third factor you must consider when financing a business sale is interest rates. If you get a buyer, what is an acceptable interest rate for a seller-financed sale?
4. Are there Additional Costs Involved?
A fourth key question to ask yourself is whether you have unsecured creditors that have not been paid off. You should also determine whether you, as the seller, are prepared to pay for a part of the closing costs to secure a good deal. These are additional costs you originally may not have factored into your plans.
5. Will the Buyer Need to Assume Debt?
Finally, will the buyer need to assume any long-term or secured debt? The issue of long-term and/or secured debt is significant. Be sure to clarify this important point well in advance. Also keep in mind that favorable terms typically translate to a higher sales price.
Merger and acquisition advisors are experts at buying and selling all kinds of businesses. When it comes time to decide on structuring a deal and a financing plan that benefits both the buyer and the seller, M&A advisors can prove to be invaluable. Working with an M&A advisor is one of the single biggest steps you can take to ensure that your business is sold, and sold as quickly as possible.