How Do I Know If My Buyer Has The Money?

Identifying Legitimate Buyers

So, you have a live buyer on the hook, and you are convinced they are going to buy your business.  You are ready to crack the champagne, but how do you know they have the money?

In today’s market raising money from a financial institution to buy a business is very challenging - for some it’s impossible.  Prospective buyers will need to be able to demonstrate a clean bill of health from a credit perspective plus sufficient equity to offer as security for the funds they are seeking.

Establish Your Buyers Equity Position

We recommend you do this very early on - establish your buyer's equity position. You need to ask them what assets they have backing them? It could be in the form of property, shares, cash or even inheritance money.  The bank will not stop there, they will want to understand how the cash flow of the business will support the loan repayments and the experience of the individuals to operate the business.  Will your buyer impress a bank?

Your best bet is to convince them to use a specialist finance broker who is an absolute expert at commercial lending, rather than their local mortgage broker or going to the bank direct!  Do you have the right person at your fingertips? Experienced business brokers have access to experts to help.

Once you get them to a finance broker or bank you may need to help them prepare a business plan and cash-flow projection holding their hand along the way – this is risky business, not just from a legal representations point of view, but you need to consider whether you have the skills and whether the buyer is comfortable to work with you in this regard.  Your buyer needs to demonstrate to a bank how they plan to make money and eventually pay off the debt.

Now, these are all pretty tricky questions to ask!  A professional business broker deals with this every day.  We know which questions to ask and how to phrase them so as to build a trusting relationship with your buyer.

So, if you are not an expert at knowing how to ask a buyer tricky financial questions about money and their equity position, nor guide them through the art of raising finance you could be setting yourself up for disappointment.  

Please contact one of our professional business brokers today for more information