How to finance the purchase of a business is one of the bigger decisions to be made during the business acquisition process. Because of this, one of the initial steps when working with a buyer is to ensure they are financially qualified to make the business purchase. In the following discussion we will dissect the ins and outs of buy side financial disclosure.
There are several main reasons a business broker will ask for financial disclosure from a buyer - purchasing capability, working capital, and outside financing.
Purchasing Capability. Transworld is looking for proof that a buyer is financially capable of purchasing a business. If the buyer is not financially capable of acquiring a business than it does not make sense to move forward with discussions. While this may come across as harsh, purchasing a business is a complex and sometimes lengthy process and we don’t want to waste the buyer’s, seller’s or our broker’s time when, ultimately, the transaction can’t be completed for financial reasons. This all being said, Transworld has businesses available in a wide range of prices and will likely have a business for most buyers.
Working Capital. Another reason Transworld seeks buy side financial disclosure is to confirm that a buyer will have enough working capital to run their business after purchase. While we love selling businesses to our buyers, we always want to do our best to set them up for success from the start. Identifying their ability to cover a business’s operational costs is one way to do this!
Outside Financing. The final reason we look for buy side financial qualification has to do with outside financing. Once Transworld starts reviewing a deal, especially deals in the $250,000+ range, there is the likelihood that the deal will require financing to complete. Each financing method has their own set of requirements to be met and the financial disclosure will allow us to identify the options and prepare the buyer in advance.
To conclude buy side financial disclosure is a key piece in setting up a positive transaction for all parties involved. Transworld likes to think of this qualification process as addressing potential hurdles up front! For more information on our business acquisition process or to meet with a knowledgeable broker, please visit our website or schedule a free consultation today!
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Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master’s Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.
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