An Overview of Seller Financing

Almost 90% of business owners have never sold a business before. So if you are at the start of your research on how to sell your business and haven't got a clue where to start, likely you are not alone. One of the many terms thrown around in discussions surrounding business acquisitions or business sales is seller financing. This term is one that almost immediately solicits a negative reaction from most sellers, but it should not be feared! It should be learned and understood as a tool to help sell your business.

The majority of businesses that sell today include some percentage of owner financing. With a rejection rate of about 80%, the SBA application process is often not an option for many businesses and buyers. Businesses that advertise seller financing along with their sale generate significantly more inquiries as well as a 15% higher sale price (estimation provided by Bizbuysell.com). There are many benefits, as well as some risk, to seller financing, so it is important that both the buyer and seller feel comfortable in the transaction.

In the following discussion, I will address common questions related to the subject of seller financing in hopes of opening up the discussion for future sellers and their buyers.

What is Seller Financing?

Seller financing is a loan provided by the current owner of a business to the new owner of said business.

Why Seller Financing?

Buyers negotiate seller financing for a number of reasons. First, they may be unable to afford the business at the full asking price. Second, the business transaction, as is, will not qualify for a traditional loan. Finally, there may be a level of uncertainty that the business will continue to be successful without the previous owner at its helm. So an owner's willingness to finance a portion of the sale often gives that business an edge over the competition, by removing some of the buyer's uncertainty.

How is the Seller Protected?

It is important for a seller financed transaction to be handled by professionals who can offer advice and construct documents that protect both the buyer's and seller's interests. Typically, a promissory note is drawn up that illustrates the details of the agreement. This note includes the recourse that the seller can take if a buyer defaults on the note. In the sale of a small business, the most likely scenario is that the seller would have the right to take their previously owned business back into their possession. Additional recourse avenues could be using the assets of the business as collateral or using a personal guarantee from the buyer. Utilizing a professional advisor to construct the terms of the promissory note will ensure that recourse actions are well structured.

What Other Terms Are Outlined in the Promissory Note?

The terms of the note are constructed in order to give the buyer adequate time to repay the note. Payments must be in an amount that the buyer can afford from the business income while continuing to run the business at an optimal level. The last thing either party wants is for the loan terms to constrict the buyer and eventually put them out of business. For this reason, the term length of seller financing varies depending on factors including: size of the loan, revenue of the business and the capital investment of the buyer. The interest rate charged on a seller financing note is typically in line with current banking rates.

Author: Al Fialkovich, Managing Director of Transworld Denver

If you are considering the sale of your business or have further questions on the subject of seller financing, please visit our website.

This article was written by Al Fialkovich, the Managing Director of Transworld Business Advisors of Denver. Transworld is the top business brokerage firm in Colorado. Our team of business brokers have the most and widest range of business listings for sale, inclusive of 100+ listings annually. Our service area covers the state of Colorado, focusing on the Denver Metro, Boulder and Golden areas. We assist visionary entrepreneurs in buying a business or selling a business in Colorado, specializing in helping family-owned and closely held businesses with their strategic plans for the future.

info@tworlddenver.com I (720) 259.5099 I http://www.tworlddenver.com Transworld Business Advisors of Denver ©

Article Source: https://EzineArticles.com/expert/Al_Fialkovich/2396253

Entrepreneurs - How to Find Out What Products to Sell

If you want to open a shop or set up a website and am not sure what to sell. Going door to door and asking people is a long-winded way of doing things - there are far better ways of discovering what to sell. First do some initial research:

• Go onto the big sites like Amazon, Etsy, eBay, PreLoved, GumTree, Fivver etc. and see what is selling, what is in demand. Make a list of several categories that you are interested in such as clothing, electrical etc.
• Go through the social media sites - especially the groups and see what is trending and fine tune your categories.
• Use these two operations to narrow down a field of what you might sell - say certain items in household goods.

Now narrow the field down by:
• Seeing what is already being sold, especially by the big sites and/or close by shops. You do not want heavy competition or saturation in the market.
• Checking that suppliers are available that will:
o Sell you small amounts to start with
o And will open up a credit account with you.
• You have some interest in what you can sell. A boring product area for you will tire you out very quickly and you will also lose interest in your company. Entrepreneurship is difficult and time consuming and you need some interest to keep you going.

Now, the most important part of your research - you need to find your market for these potential products.

What you are seeking is a window of opportunity as well as a ready market that will buy what you want to sell at a price you want to sell it at. A window of opportunity is you finding a ready market for what you want to sell. So back to the social media sites, especially the groups. Join in the discussions and see what they think about your potential products. This does NOT mean that you try selling- that is a quick way to get thrown out of the groups. Just generally chat about the interests of the group and use these conversations to fine tune your products.

The last part of your research is to find the price that you can sell your group of products at. This is best done by split testing. Set up some simple adverts on Facebook or Google. Set one up with one price to go to a set landing page and another with a different price to a different landing page. So as not to annoy your potential customers, use different websites and branding if you can. If this is not possible then do some more research and seek out what prices others offer the products at.

Once you have a potential price range then make a detailed check to ensure that you can sell at this price and make a reasonable profit.

Once all this research is undertaken you are ready to start your new business.

If you would like consultancy assistance then The Biz Guru, with 30 years experience, offers Skype based consultancy to assist you with starting your new business. http://www.StartMyNewBusiness.com/consultancy/

Article Source: https://EzineArticles.com/expert/Lee_Lister/15449