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What Financing Options Are Available When Buying a Business?

Are you considering entrepreneurship and buying a business? Are you considering franchising? Raising finance for buying a business or securing external funding can tend to be a daunting process especially when you are a 'rookie' in the industry, and venturing into business for the first time or running small enterprises. Financial planning is very crucial to avoid making decisions or mistakes that can affect you for years. Only a few options may come to your mind, but there are many more you can explore. Consider some of the common financing options outlined below to make an informed choice. 

Financing From Banks and Financial Institutions

Banks offer a wide range of financial support options for businesses apart from offering advice on suitable financing options. A lot of financial institutes offer special financing and programs for small business owners. Consider working with Small Business Administration-backed lenders. An important step to take when deciding what is best for your personal situation is to entrust the services of your CPA or financial advisor. That individual is most privy to your unique circumstances and will help you make the best, most realistic decision on financing your dream.

Options provided by the bank include:

Fixed term business loan
This option allows you to borrow money from the bank over a definite period of time which is to be repaid with interest according to agreed installments which in most cases is monthly. Part of the money borrowed can be used as working capital to support the business or your other plans.
 
Borrowing against assets
You can use your equipment, inventory, and equipment to borrow money from the bank. The amount to be given by the bank depends on the value of the assets. Using this financing option can come in handy as an investment or working capital for your new business.

Cash-flow finance
This financing option allows you to borrow against the value of your unpaid invoices. It means you can be awarded up to 85% of the approved invoice's face value. You will then receive the remaining funds of the invoice excluding the charges of the financing service.

Finding Your Village of Investors
Deciding to go against a bank loan or line of credit means you'll have to secure financing for your business elsewhere. Of course, asking for investors in any economic climate can be challenging, whether you're looking for start-up funds, or capital to continue an existing business. Here are some ways to secure financing from investors.

Personal Investment
This financial option means sharing your enterprise (or equity) for investment by a third party to improve liquidity. Unlike business loans borrowed by a bank, you do not need to make any repayments on the money invested. However, the people who invest in your business are likely to strike a hard bargain regarding shares in the enterprise on return on investment. This solution is often used for financing growth plans for scalability. 

Business grants
While there's no such thing as free money, a business grant can go a long way to help small business owners in their venture to be successful. Conduct research on what you can qualify for, and apply even if you think you'll fall short of qualifications. 

Crowdfunding 
A new-age way of funding business, charity, and other start-up enterprises, crowdfunding has become a viable option for a wide array of organizations to gain the financial support they need.  

 

Other Sources of Financing

Family and friends
Most people would go for this financing option when buying a business or in need of money for other purposes but it's important to weigh the pros and cons.
Pros:
  • Borrowing from friends and relatives means more flexibility because they know you and may be lenient and give you more time to start making profits in your business.
  • You can take advantage of this situation and also borrow a loan from the bank and start with the bank loan which has strict policies and still pay back your loved ones as agreed.
Cons:
  • You risk damaging your relationship in the future in case of any ambiguities
  • Investment or borrowing money from family and friends is a serious commitment which requires serious terms 
Top Tips to Prepare for Buying a Business
If you're looking into becoming an entrepreneur, and owning a business is on your list of possible business ventures, financing your dream requires much thought and research. Ensuring you make the best decision based on your personal and professional situations is crucial to your success and well-being as a business owner. If you don't know what options you have, or which is best, consider a business advisor whose experience and expertise will help you lead the way to to financing that makes the most sense. 
 
 
 

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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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