It Is Critical That You Involve Any Backers In The Buying Process. Counting On An Investor To Help You Buy A Business
It Is Critical That You Involve Any Backers In The Buying Process.

When it comes to buying a business, there is no escaping the fact that you need to have ample financial resources available to you.

This is especially important in the current market as third-party financing is far less available than it was in the past. Sure we are seeing some movement in SBA-backed deals, but they are still at a trickle, and it will take time until they provide any meaningful difference to the business for sale landscape.

I wish it were possible to buy any business with no money down. Yes, it does happen occasionally, but it is not the norm. Anyone who tells you otherwise is simply misleading you. Don’t get me wrong,

it is something that every buyer can pursue aggressively with a seller or investors, but again, to obtain these types of deal terms will require you to dig deeper and possibly search longer.

At the same time, I see many buyers who are counting on an associate, family member or other investor to assist them in financing the purchase of a business. You must realize that sellers will naturally be apprehensive about this type of situation, and so too will any broker.

Since the business for sale market is flooded with “lookers” you have to be able to demonstrate that you do in fact have the financial wherewithal to consummate a deal, whether it is your money or someone else’s – it is not simply a matter of telling sellers that you have the capital.

Rather, it is very much their perspective of wanting you to “show me the money”.
Your financial partner should provide documentation that you can present to any prospective seller and broker that will outline who they are, how much they are prepared to invest, and confirmation that they are willing to provide financing to you.
This can be done in the form of a letter from their accountant or attorney, or simply a personalized letter with adequate backup of their financials.

Similarly, having this instrument in place will provide you with confidence that the investor will be there when you need them. It is very easy for people to tell you they will back you financially, but far too often their words become meaningless promises when the time arrives for them to write the check.

As a final note,

it is critical that you involve any backers in the buying process.

Keep them informed of the opportunities you are evaluating, get their feedback on any deal, find out what it is that they want to see in a business where they may invest.
If you bring them a business that they simply do not believe will be successful, it will require quite a sales job for you to convince them to part with their money.
Remember, they are betting as much on the jockey (you) as they are on the horse (the business), but if the horse has no chance, they won’t place their bet.



This article represents a fraction of what you’ll learn on this topic in the How To Buy A Good Business At A Great Price© series - the most widely used reference resource and strategy guide for buying a business. To learn more click here

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