Financing The Purchase

Question:

What options are available for financing “goodwill”, other than seller notes? How do you finance the business’ non-tangible assets?

Answer:

In many cases of small business acquisitions Goodwill does represent the greatest asset value.

Traditional lenders will almost always want their financing to be secured by a combination of business and personal security.

As such, for the business you described, chances are that everything will be dependent upon your credit worthiness and the available personal security you have to collateralize the loan.

Most prospective business buyers are not in a position where they can secure a note.

That’s why seller financing is your best and sometimes only viable option.

There are of course other sources for financing such as venture capitalists or angel investors; however, they usually don’t get involved in small business purchases.

As with family/friends, good luck…it’s usually the quickest way to make enemies.

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