This article are provided for information purposes only, and are not intended as legal advice.

Selling your business – payment options

December 1st, 2008

You can ask for cash when you sell your business but you may not get the highest price for an all cash deal.  If there is a lot of risk that the customers may not go to the new owner or there is a downturn in the economy and the prospective buyer does not know how this will impact your company, the new buyer may want you to share in the risk and wants you to provide a vendor take back financing.  They may be willing to pay you a higher amount than a pure cash deal which could be discounted to factor in the risks that the new owner is taking.

If you provide a vendor take back, how do you protect yourself.  Can the new owner transfer the assets to another company therefore there are no assets to pay your note back?  Do you restrict the amount of compensation that the owner can take out?  Do you restrict some of the activities of the business for example, prevent the company from expanding into new areas before paying you out?  What security did the new owner provide?  Did you subbordinate your loan to the bank? How much equity is the new owner risking?  If the new owner is not putting any equity into the business, you risk that your vendor take back loan may not be repaid.  What happens if the new owner defaults, can you take back your company?

Filed under: Sell a business — Gary Landa @ 10:17 am

1 Comment »

  1. business franchise…

    Didn’t realise there was this type of information out there…

    Trackback by business franchise — December 26, 2008 @ 12:20 am

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