Structuring the purchase of a business is an issue that should be faced early
in the selling decision. Ultimately, the final structure of the sale will be
determined by actual negotiations between buyer and seller, but the seller
must still answer the following questions:
- What is the lowest amount of cash acceptable from the sale?
- Has consideration been given to paying off all unsecured creditors and
a portion of the closing costs?
- Is there any long-term debt that can be assumed by the buyer? (This may
make more cash available for the seller.)
- What is an acceptable interest rate for the seller-financed sale?
- Will the business be able to service the debt and still provide a return
acceptable to a buyer in relation to the down payment required? (This is
a particularly important question for the seller to address.)
Recent studies indicate that the more favorable the terms the higher the price.
In fact, one study found that offering favorable terms might increase the total
selling price by 30 percent. A business broker professional can advise you
on the all-important issue of seller financing.