Buying or Selling a Business
We have said buying or selling a business is different than any transaction you may experience in your lifetime. Some people think that it’s similar to real estate… Not Even Close! Businesses, depending on the industry can have patents, barriers to entry, trademarks, copyrights, inventory, contracts, intellectual property, trade secrets, distribution rights, goodwill, proprietary software, manufactured products, equipment, machinery, supplier agreements, work in progress at various stages, use rights on air, water and land and this list is by no means complete. Suffice it to say the list of components contributing to business value can be few or many. Each must be identified and examined in determining company value.
When you work with Northwest Arkansas Business Brokers in providing the necessary company information that ultimately becomes your business valuation our objective is straightforward. And that is to create an accurate, comprehensive and compelling business valuation report that is irrefutable. A document that withstands the scrutiny of buyers, their advisers and when presented to a financial institution they will more than interested in financing the transaction.
If you are considering selling your business, transferring it to partners or family members in the next 1 to 3 years it would be good to start planning your exit strategy as soon as possible.
Business Financing for Multiple Purposes – Local Bank or SBA 7(a) Loan
Business valuations are a useful tool in obtaining financing for business owners from a financial institution. When larger amounts of capital are needed, a bank may want the Small Business Administrations (SBA) to guarantee the loan and under that scenario a business valuation is required. One of the most popular loans, the SBA 7(a), can be used for many purposes such as long-term working capital to pay operational expenses, accounts payable and/or to purchase inventory. Other uses can include short-term working capital for seasonal financing, contract performance, construction financing and exporting, revolving funds based on the value of existing inventory and receivables. Even more you may purchase equipment, machinery, furniture, fixtures, supplies or materials as well as real estate that includes land and buildings or the construction of a new building or renovate an existing building. Also, the SBA 7(a) loan can be used to purchase a new business or assist in the acquisition, operation or expansion of an existing business. Under certain conditions it may be used to refinance existing business debt.
We have all heard stories that obtaining an SBA loan is a nightmare. Well it can be but it doesn’t need to be. However, you do have to know how to put it together. When building a house you don’t build the roof first; the foundation second then try to to put the plumbing in and slide the walls in between. Northwest Arkansas Business Brokers has prepared many business that meets the criteria for bank and SBA financing If you have questions… we have answers.
In life changing events such as divorce, often times the most valuable and illiquid asset in the marital estate is the business. In most cases of marital dissolution, often a reasonable assessment of business value is at the heart of finalizing property settlements and the parties simply need an objective, unbiased opinion to aid in settlement efforts. In more complicated cases the issues may extend to a determination of what percentage of goodwill is martial versus personal and may require expert testimony by the evaluator on behalf of the business value. If you are considering or involved in a divorce and wish to receive more information on how Northwest Arkansas Business Brokers can assist you contact us.
Many business owners dream of one day handing their business over to a family successor. At first blush this may seem easy; however thousands of businesses each year are literally destroyed due to improper planning for family succession. In addition to choosing the successor, often one of the main causes of contention is value. While first generation owners tend to undervalue their enterprise, in some cases their successors take for granted the efforts involved in building a viable business and the resultant conflict is price.
Having an unbiased, third party opinion of value is one of the essential steps to preparing your estate for the next generation. In a situation where tempers can flare and relationships can be broken an independent evaluation will reassure you and your successor(s) that the transfer of ownership is both just and equitable. Additionally there are a number of tax laws surrounding this type of transaction. If you plan to continue your business legacy by giving versus selling ownership to a family member, we will introduce you to a qualified CFP and CPA that we highly recommend to ensure the letter of the law is followed, thereby avoiding potentially disastrous tax liabilities.
STRAIGHT TALK – If you don’t know the value of your business in any of the above scenarios how can you gauge an offer if selling, or avoid paying too much if buying? If divorcing, the values for each party and the tax consequences? How can you equitably transfer a business and its assets to family or how much capital can you borrow for expansion? It’s imperative to understand the determining factors that drive value and possessing that knowledge is a powerful tool that yields effective and equitable agreements. Northwest Arkansas Business Brokers will make sure you will know not only the range of value your business is worth… but why it’s worth that amount.
We have listed five uses for business valuations above and while there are more, these are the most common business valuation services that are used in serving small business owners. Whatever the purpose, should you have any questions about these topics or how Northwest Arkansas Business Brokers can help you with your business valuation…… Call 479-855-9000 or contact us.