Tuesday, November 20, 2007

Steps: Before You Buy Out a Business

The last posts I talked about the necessaries and basics of Small Business Start up Loans for your working capital or capital financing demands. This post I will discuss some of the absolute prerequisites before even thinking of going for a loan.

If you want funding so that you can steal out a small running business or a start up you need to know exactly the state of that business to negotiate a bargain if any, or to avoid paying to a greater extent than the business is worth, or whether or not to go for it at all.

These are Following steps should be taken to understand the current state of a business:

Visit Facility:

Check the facility and see it in activeness. Don’t be swayed by the super numbers on paper, visit the business. In fact, get an appointment with the vender to check out the business and then go again by yourself. This is the best way to find out the ground realisms.

Decide Professional Help:

Keep touch with some professional to do the valuation. If you don't want to hire anyone for the evaluation, at least get an lawyer to help you on many legal issues involved in such deals.

Request financial information:

The minimum you must insist upon:

- Corporate Tax returns for three years.

- Financial statements for three years.

- Inventory listing

- Accounts receivable aging.

- List of capital assets

- Accounts payable aging.

- List of equipment.

Check up on the price of comparable businesses and the industry:

The professional person you would hire might give you some info, but the best place is cyberspace. Check out the forums; articles; ask the industry experts.

Obviously none of these steps are required if your necessity is just working capital or if you are looking for financing small business loan for start ups.

In both cases, steps provided in my previous posts should be taken or for working capital financing requirements you can go for business cash advance.

The cash advance will be Pay back from the credit card sales that the business does in a particular period, usually through automatic debit. Organizations like Merchantcashdirect provide such cash advance.


Anonymous said...

I'll have to keep this post in mind because I plan on running a business soon. I've been thinking about it for a long time now, and I can use all the help and advice I can get. Also, lately I've been thinking about buying a business instead of starting one from scratch. Any suggestions? Advice? Thanks a lot.

Freddy MacAdams said...

@S. Mae -- There are a lot of other online resources you can use. This site called BizTrader.com is an online global marketplace where you can buy or sell a business. It also has good advice, and you can use it to find a lender, broker, accountant, etc. It's a good place to check out if you're interested in buying a business.

You can also check out local small business groups, like perhaps your local Chamber of Commerce, for more help. It also doesn't hurt to network in your area.

Good luck!