At first glance the idea of buying a business with no collateral may seem impossible, but in reality it can be done. Let’s examine your options. When it comes to achieving this goal, your greatest assets are an open mind and a commitment to hanging in there despite the odds.
The Small Business Association’s 7 (a) Program is Your Friend
One possible avenue for buying a business with zero collateral is to opt for the SBA’s 7 (a) program, which works to incentivize the bank to make a loan to a prospective buyer. Under this program, the SBA guarantees 75%. The buyer still has to put in 25%; however, this money doesn’t necessarily have to be his or her money. This is where things really get interesting. The cash that the buyer uses can come from investors or even be a gift from parents in the case of young buyers. These possibilities all fall within the SBA’s guidelines.
Look into Seller Financing, You Might Be Surprised
There is a second way to buy a business with no collateral, and that comes in the form of finding a seller who is willing to finance. Again, this might seem counter intuitive at first glance. But the facts are that a large percentage of sellers do agree to offer some level of financing. So in other words, seller financing is not unheard of and stands as a viable way for a prospective buyer to buy without collateral.
Combining Seller Financing and the SBA’s 7 (a) Program
Combining the SBA’s 7 (a) program with seller financing can prove to be a powerful combination. It is important to note, however, that if you do use the SBA’s 7 (a) program the seller cannot receive his or her repayment for two years.
Ultimately, you will likely need to be rather persistent when trying to find a bank. Rejection is likely. But if you are persistent, it is possible to make the SBA’s 7 (a) program work for you.
One key way to keep yourself motivated is to constantly remember that jumping through some hurdles is all part of the process since you’re trying to circumvent the traditional route of using collateral. But working relentlessly may be worth it because if you are successful, you have acquired a tangible asset without any collateral of your own. That is no small accomplishment.
Don’t be afraid to ask for advice from S.C.O.R.E., the Small Business Administration (SBA), or an experienced business broker. While it might sound very unlikely that you’ll be able to buy a business without collateral, plenty of people have successfully done so.Read More
Ensuring that your employees stay on course during your ownership transition should be one of your key areas of focus. There are many key steps that you should take during this delicate time. Let’s explore the best tips for keeping your employees engaged throughout the entire ownership transition process.
Step 1 – Establish and Implement a Training Program Early On
If you are selling your business, then be certain that you train replacements early on in the process. Failure to do so can result in significant disruptions. Additionally, if you are buying a business it is of paramount importance that you are 100% confident that there are competent people staying on board after the sale.
Step 2 – Address Employee Concerns
No matter what your employees say or how they act, you must assume that they are worried about the future. After all, if you were them wouldn’t you be concerned at the prospect of a sale? The best way to address these concerns is to meet with employees in small groups and discuss their concerns.
Step 3 – Don’t Make Drastic Changes
Above all else, you want a smooth and fluid transition period. A key way to ensure that this time is as trouble-free as possible is to refrain from making any drastic changes before or after the transition. Remember the sale of the business is, in and of itself, shocking enough.
You don’t want to add yet more disruption into the process by making changes that could be confusing or unsettling. In other words, keep the waters as calm as possible. Drastic changes could lead to employees quitting or worst of all, going to work for a competitor.
Step 4 – Focus on the Benefits
If possible focus on the benefits to your employees. It is your job as the new business owner to outline how the sale will benefit everyone. Don’t let your employees’ imaginations run wild with speculation. Unfortunately, this is exactly what happens when employees and management feel as though they are not receiving any information about the sale. So don’t be mysterious or cryptic. Instead provide your employees with information, and keep the focus on how the changes will benefit them both personally and professionally.
Implementing these four steps will go a very long way towards helping to ensure a smooth transition period. Transition periods can be handled adeptly; it just takes preparation and patience.Read More
A common question in the realm of buying and selling businesses is, “Is it possible to sell to a business competitor?” The short answer is yes, it is quite possible and rather common. That stated, selling to a business competitor is different than selling to a buyer who is completely new to the industry. The two types of buyers should not be treated the same way, as there are various differing variables.
A Competitor Can Be a Great Buyer
One reason is that a competitor may indeed be the right party to buy your business, is that they usually have an excellent understanding of how your business and your industry works. They may also enter the negotiation process already understanding the value of your business, and this can serve to speed up the process.
Always Proceed with Caution
Competitors, however, must be approached carefully. Unfortunately, there have been many cases where competitors acted as though they wanted to buy in order to acquire access to inside information. That’s why sensitive information like client lists and other “secrets” shouldn’t be shared until the sale is complete and the money is literally in the bank.
Working with a business broker is always a prudent move when it comes to buying and selling businesses; however, when working with a competitor is involved a business broker is even more important than normal. A business broker can act as something of a shield in the process, helping to ensure that you don’t reveal too much prized information until the sale is 100% complete.
Negotiate from a Place of Knowledge
Further, a business broker understands how much your business is worth and can back up that valuation. Having this information before discussing a potential sale with a competitor is of great importance.
Be Prepared to Accept Certain Legal Conditions
Finally, don’t be surprised if your competitor asks you to sign a non-compete or for you to stay on as a consult after he or she has acquired your business. This is a prudent step and one that makes tremendous sense. If you were buying a business from a competitor wouldn’t you want to make certain that the competitor didn’t simply “set up shop” somewhere else a few months or even a couple of years later? Likewise, tapping your expertise is another prudent move for your former competitor.
Summed up, selling your business to a competitor is a potentially great move, but it is also an opportunity that absolutely must be explored with extreme caution. Never divulge critical information to your competitor until the deal is finalized.Read More