In today’s environment of tight money, you must be financially prepared to purchase a business and be able and willing to demonstrate your ability to buy. No buyer wants to waste time investigating an opportunity that is beyond reach and no seller wants to waste time with a buyer without the financial resources to buy.
A serious buyer will match up his/her financial capability with the desired business. Usually a buyer will need a minimum of 20-30% of the purchase price as down payment, access to working capital, and a good credit rating to qualify for a loan from a bank or from the seller. Sellers may, if highly motivated, accept a lower payment, but they are still very concerned about being paid.
As a serious buyer, you should:
- Know how much money you have available to invest in a business.
- If needed, know how much is available from other sources; family, friends, other investors, retirement accounts, or other sources.
- Know how you intend to finance the balance of the purchase price.
- Know how you will sell yourself to the seller if looking for seller financing.
- Be prepared to provide a personal financial statement and resume.
Being prepared and willing to demonstrate that you are a serious, financially capable buyer to business sellers, business brokers, legal and accounting professionals, etc. will separate you from the majority of people who are “just looking” and give you an excellent chance to purchase a business that is right for you.