Need financing to help buy a business? Your first stop should be the CURRENT BUSINESS OWNER i.e. -the Seller. Instead of getting a loan from a bank, why not ask the business owner to lend you the money for the purchase of the business? This happens. It happens every day. Here’s how….
An often overlooked option to help begin the journey towards buying your own business is to simply reach out to a business broker for guidance before you begin your search. If you can identify a quality business broker, which isn’t easy, this can be a way to help jumpstart your search and increase the chances of finding a successful acquisition. Brokers typically represent multiple deals within their category of expertise simultaneously, and if you’re able to establish a relationship with a productive broker you gain access to a continuous stream of deal-flow. The trick is to identify that unicorn broker.. The one who’s knowledgeable, productive, and won’t waste your time pitching you subpar, low probability deals for sale.
If your broker is telling you that seller financing isn’t an option to buy an existing business that you like, I recommend you test that with the seller of the business personally.
What is seller financing? -It’s when the seller of a business acts as your bank. More often than not, when somebody is selling their business, they expect to lend you up to 50% of the business value in the form of a note, carrying interest and being paid off through the cash-flows of the business over a period of five to seven years after the purchase of the business.
A term sheet is a non-binding agreement outlining the basic terms and conditions under which an investment will be made. The term sheet acts as an outline for the parties involved so that once an agreement has been reached, a contract will be formed that adheres to the conditions defined in the term sheet.
A term sheet covers the major aspects of a deal, reducing the chances of a misunderstanding between parties. It also ensures that expensive legal fees attributed to drafting a binding agreement are not prematurely paid due to disagreements that arise. Here are some tips on creating an effective term sheet.
Perhaps “love” is a strong word. Perhaps “not be put off by” is more appropriate. Flat revenue refers to a chart’s depiction of the historical trend of a business’s revenue – flat revenue means that the trend line is nearly horizontal, stagnant, … flat. Some prospective buyers immediately move on to the next business to be considered when they see a flat revenue trend.