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Buying a business
Posted on 6/18/21 at 7:08 am
Posted on 6/18/21 at 7:08 am
Tossing around the idea of buying a business. Business can provide all needed financial statements proving it is profitable. Any tips on how to move forward as far as what else the bank will want/need? Or am I missing anything?
9
Posted on 6/18/21 at 7:18 am to jkcooper92
Make sure there is no pending litigation.
Check the last 5 years of P&L and Balance Sheet to make sure it’s steady and stable.
How diverse is the customer base? A bunch of good customers or one big one?
How involved is the current owner? Do most sales and relationships flow through him?
How stable are the vendor relationships?
How well do you know the business and can you add to revenue?
Make sure you have plenty of cash on hand and be prepared for every possible aggravation imaginable.
Edit: It is incredibly rewarding and a great idea to invest in yourself. Good luck!
Check the last 5 years of P&L and Balance Sheet to make sure it’s steady and stable.
How diverse is the customer base? A bunch of good customers or one big one?
How involved is the current owner? Do most sales and relationships flow through him?
How stable are the vendor relationships?
How well do you know the business and can you add to revenue?
Make sure you have plenty of cash on hand and be prepared for every possible aggravation imaginable.
Edit: It is incredibly rewarding and a great idea to invest in yourself. Good luck!
This post was edited on 6/18/21 at 7:22 am
Posted on 6/18/21 at 7:18 am to jkcooper92
Anyone can buy a business.
Can you keep the business?
The bank will want your express permission to take all your assets if the business fails. "Sign here and press hard. There's 3 copies."
Can you keep the business?
quote:
Any tips on how to move forward as far as what else the bank will want/need?
The bank will want your express permission to take all your assets if the business fails. "Sign here and press hard. There's 3 copies."
Posted on 6/18/21 at 7:47 am to jkcooper92
I work for a local bank in Baton Rouge. You will need at least three years of business financials, three years of personal financials, personal financial statement.
Do you have any hard collateral? The bank will want some hard collateral. We have a product where you can use your house as collateral.
Let me know if you need anything else
Do you have any hard collateral? The bank will want some hard collateral. We have a product where you can use your house as collateral.
Let me know if you need anything else
Posted on 6/18/21 at 8:03 am to jkcooper92
You need more than a message board conversation. Do you have a burner email address?
Posted on 6/18/21 at 8:29 am to jkcooper92
I'm not sure what you're bank will want or need, but I am sure you must purchase assets, and not stock or member units. If you're forced to purchase stock, etc., you'd better look into tail coverage. It depends what type of business, and there are easy fixes. A good bank knows this. If the bank isn't concerned with this, it's not a good bank, and the banker is incompetent.
Situation specific, the loan is probably a seven year term if it's smaller (maybe $1.5MM or less), the tail situation is potentially the rest of your life. I'd think for $1.5MM, you wouldn't need a down payment. At least I've never had to come up with one other than pledge some assets.
$1.55MM and less, find a smaller bank. Endeavor to make your banker, accountant, tax attorney, attorney and insurance person your friends, and part of your team. Do not throw a dart at the yellow pages picking these people out, and do not price shop them if they are good and add value.
Situation specific, the loan is probably a seven year term if it's smaller (maybe $1.5MM or less), the tail situation is potentially the rest of your life. I'd think for $1.5MM, you wouldn't need a down payment. At least I've never had to come up with one other than pledge some assets.
$1.55MM and less, find a smaller bank. Endeavor to make your banker, accountant, tax attorney, attorney and insurance person your friends, and part of your team. Do not throw a dart at the yellow pages picking these people out, and do not price shop them if they are good and add value.
Posted on 6/18/21 at 1:24 pm to jkcooper92
The people working for the company ...
Posted on 6/19/21 at 9:47 pm to jkcooper92
Are the statements audited?
Posted on 6/20/21 at 11:51 am to jkcooper92
Get an attorney that knows acquisitions.
1. As stated by the assets and not the company. Buying the company opens you up to all kinds of legacy litigation.
2. Are key customer/supplier contracts transferable to a new entity/owner?
3. Consider a non compete/non solicitation agreement from the current seller/owner.
4. Understanding the balance sheet and depreciation schedules for the assets is important to knowing if there is real distributable cash at the end of the day.
1. As stated by the assets and not the company. Buying the company opens you up to all kinds of legacy litigation.
2. Are key customer/supplier contracts transferable to a new entity/owner?
3. Consider a non compete/non solicitation agreement from the current seller/owner.
4. Understanding the balance sheet and depreciation schedules for the assets is important to knowing if there is real distributable cash at the end of the day.
Posted on 6/21/21 at 9:01 am to jkcooper92
Thank you all for the replies. This is my favorite thing about TD! Have a great day!
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