It is important for small business owners and prospective buyers of a small business to understand the financing options for selling or buying a business. The Small Business Administration (
www.sba.gov/) offers financing through preferred lenders for small businesses that qualify and prospective buyers that meet the criteria. A small business for sale can qualify if the selling price and loan exceed $250k by an appraisal process required by the SBA. A prospective buyer of a small business can qualify by submitting a detailed application for the loan (along with the detailed financial data of the business they want to buy). While this is not an easy process, many people have successfully acquired SBA financing to purchase a business and commercial real estate.
The predominant method for financing the sale or purchase of a small business is seller (owner) financing. This is a situation whereby the buyer agrees to buy a business with a certain amount of money down (a minimum of 30% of selling price down) and the business seller willingly holding a private note with terms and conditions satisfactorily negotiated between seller and buyer for the balance. The note is recorded and collateral along with personal guarantees are pledged by the buyer to the seller.
