September 6, 2015
Q: I'm trying to sell my small business, but I'm finding it difficult to do so at the price I need in order to retire. Other than dropping my price, what can I do?
And while dropping the price is not something you want to hear, you will know the price is finally right when the phone starts to ring. There is a sweet-spot price for your business where it will sell, though that may be less than you want.
Q: I'm trying to sell my small business, but I'm finding it difficult to do so at the price I need in order to retire. Other than dropping my price, what can I do?
A: Others in your situation have found that offering some seller financing facilitated the sale of their businesses.
The reason is obvious: Many buyers don't have and
can't borrow all of the money necessary to purchase the business
outright. And those who do may prefer to leverage the purchase to
increase the return on their investment. And of course most lenders do
not offer anything close to 100 percent financing on a business sale
loan.
Seller financing can be a win for both parties. For
you, it makes selling the business easier. By helping to finance the
sale, you can get a better price and a faster sale. Other benefits
include getting an ongoing interest payment that is typically more than
you could get from another investment.
If there are any problems with the business, the
seller can negotiate an "as-is" provision, which would be hard to do
with more conventional financing. If the buyer defaults on the note, the
seller gets the business back and keeps all the payments made up to the
default.
Of course, there are risks involved. The main one is
that if the buyer defaults on the loan, you may be forced to repossess a
business you no longer want that may have been damaged by the buyer.
But a seller can diminish the likelihood of that happening by reviewing
the buyer's credit history, statements from financial institutions,
employment history and other references before the purchase.
For the buyer, the fact that an owner is willing to
finance some or all of the sale is evidence that the business is sound;
otherwise the seller would not finance it.
Beyond offering to finance part of the sale, other
things you can do to help promote the sale of your business include
hiring an experienced business broker who has access to more qualified
buyers, thereby saving you time, money and headaches. The broker will
help you to value your business accurately.
And while dropping the price is not something you want to hear, you will know the price is finally right when the phone starts to ring. There is a sweet-spot price for your business where it will sell, though that may be less than you want.
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