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How to Finance a Business Purchase

As a successful and experienced entrepreneur, you know the importance of securing a financial plan that works for you, and the individuals who you are purchasing from. Before you even develop a rough draft of the business you are interested in acquiring, you should have a clear idea of where your money is going to come from, and how you can best make a sound decision on your financing options.

Modern commercial banks have been hesitant to provide long-term loans to small businesses and entrepreneurs, but by utilizing your skills, and having the right information on sourcing financing, you’ll be able to buy a business with confidence and secure funds.

The following tips offer options for entrepreneurs on how to finance a business purchase, and what you need to know to successfully make a deal.


Down Payments

If you’ve decided to head into a large commercial bank and ask for a loan, be prepared to make a down payment. Some major banks will ask for a down payment of 15 percent to 20 percent of the seller’s listed price before distributing a loan. SBA (Small Business Association) loans may require a down payment, but their loan structure is built to help small businesses and entrepreneurs get a loan, who may have been turned away from traditional banks.


Seller Financing

Since traditional banks have been deemed particularly difficult to receive a loan from, seller financing has quickly become one of the best financing games around. By directly obtaining financing from the seller, you can hash out a deal that works for you and the existing owner. Usually, in these cases, a seller is willing to wait for three to five years for an amount to be paid off. Although not all sellers can wait around for payday, many are willing to finance with entrepreneurs directly for an increased rate of lending.


Bank Loans and Pre-Qualifying

Once you’ve found a business that seems profitable and has potential to be your next investment as an entrepreneur, being pre-qualified for a loan allows sellers to be confident in your ability to pay the amount agreed to upon a sale. It may be in your best interest to secure funding for an amount higher than the asking price, and to get approval from various sources to display to the bank or lender when asking for a business loan.

Debt financing occurs when you borrow money from an outside source, most usually a bank, to secure the purchase of a business. Agreements usually consist of a directive to repay the loan principal, with an agreed to rate of interest over the time frame of the loan.



Having collateral when trying to obtain financing will help lenders and debt financiers gain an idea of what assets are available, in the case of any contract breaches. Collateral can include:

A business’s accounts receivable, machinery, or inventory.

Equity of your home, or a second – or third – mortgage on your home.

Transworld Business Advisors of Minnesota helps entrepreneurs with expertise and successful business owners acquire the business they’ve always desired by evaluating different business purchase finance options. Visit our listings of available businesses for more information.

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Ten Steps To Selling Your Business

Our Sellers except us to achieve the highest and best offer for their business while taking the least amount of their time away from it as possible. That is because the absolute best use of their time is to continue to run and grow the company.  If revenue or profits begin to decline, buyers will walk away or decrease their offer. Transworld's philosophy can be summed up in a ten step, how-to strategy that culminates with the sale of a company. This proven method has been used to sell hundreds of businesses.  Here are the steps. Step1 Comprehensive Business Analysis and Feedback As your business broker, the first thing in our how-to strategy is to analyze your operation, finances, market potential and industry trends. We take that information and advise you on steps to prepare your business for sale, and  generate a business profile that represents your company in the most attractive way possible. Step2 Sale Structure We identify the best possible price range to sell your company. This is based on solid facts, the condition of the market, projected growth, sales potential and the sale of similar businesses within your industry. Transworld’s experts apply sophisticated, time-proven valuation techniques to ensure that your price is appropriate for the current market condition. The price must not be too high or too low. Yet, it must represent an attractive investment potential for the buyer. Step3 Confidentially Network The Business For Sale During the selling process, we utilize the latest technology to present your company to other business brokers and strategic buyers all over the world. This greatly multiplies the effort in your favor. With Transworld Business Advisors, you have literally thousands of industry professionals confidentially representing your company to buyers.   Step4 Confidentially Advertise To Buyers Our aggressive marketing program ensures your confidentiality and provides maximum exposure for your company. Your listing is placed in various industry databases, Internet sites, and publications which are constantly updated. We spend more money in advertising and marketing for buyers than anyone else in our industry. Step5 Control The Information Flow We organize all necessary documentation and release information only as needed. We use limited information when advertising to maintain confidentiality. Buyers are pre-qualified and required to execute a confidentiality agreement before receiving any sensitive business information. Step6 Create Competition For Your Company We attract thousands of buyers, creating competition for your business. Buyers are qualified for financial ability to meet the offer, and we engage you with only the most qualified buyers. Once you meet the best of the buyers, we urge them to prepare and present all offers. We can continue to engage potential buyers on your behalf as negotiation on an offer is in process and have another interested party ready to go should a buyer change their mind. Step7 We Negotiate For You To Achieve The Best Price Appropriate negotiation is crucial to achieving your best price and terms. We have the expertise to establish sound and resourceful negotiating techniques on your behalf. Transworld has trained all of its agents in the art of negotiating through curriculum that we have created specifically for our industry. Never negotiate without planning, expertise, or from a position of weakness. Step8 We Provide Exceptional Support To You Through The Due Diligence Process We take pride in our exceptional service. Only half of the job is finding the right buyer who will pay your price and meet your terms. The other half is getting that buyer to the closing table. We quarterback the deal, work with the accountants, lawyers, banks, landlords, and other third parties that could jeopardize the success of the transaction. We realize that you depend on us to guide you through the sale of your business. We make the transition simple and easy for you. We know when an opportunity for you may arise and are always there to take advantage of it. We also know when someone is trying to kill your deal or is being unreasonable and how to handle those situations. Step9 We Are There From Beginning To The Closing We help manage all administrative procedures, licenses, inventory counts and lease assignments that may be required. Transworld works closely with your advisors to ensure a smooth transition. Using the latest technology, we strive to be ready to work on your behalf to get the deal done! Step10 We Are There For The Transitional Phase And Beyond! Because we are in the business community, you may want to consult us from time to time after the sale. We will provide you with the assistance after closing. Transworld will always remain in your corner! Schedule Consultation Now

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