HOW TO EVALUATE THE TRUE WORTH OF A BUSINESS

PART 20 of 21

"How is the Value of a Business Worked Out?"

by Willard Michlin

The financing of a business is a relatively straightforward process, if you are aware of what lenders are looking for and generally what they will and will not do. They will be looking at your credit, your experience and the sort of down payment you have and information about what sort of note the seller is willing to take back when selling you the business. As has been stated, the down payment on a business can be anywhere from 25% to 100% of the selling price. Lenders will not lend you this down payment money on the business itself. You will usually need to get this money from other sources, such as your personal savings, a family member, a retirement plan or other. Your credit should be sorted out well before you start on buying a business. You want to handle any negative reports on your credit fully. You do not want anything that is negative showing up when a lender is checking your qualifications. Negative credit reports make them nervous. Once you decide on the business you want, a business plan on the business is essential before approaching a lender. They will want to see that you have some familiarity with the industry of the business and that you have some sort of management experience. Information on the availability of management and executives in the business that is going to stay after you buy it and so on should be included in this business plan. Also information on the training that the seller is committing to pass on with the sales of the business should be in this business plan. If you handle these basics really well, it should be a relatively easy process to getting qualified for the funds to finance a business.

Willard Michlin is a Due Diligence and Business Evaluation Advisor, a California Business Broker and, a California Real Estate Broker. He has published many articles and is a highly recognized Public Speaker in the Southern California business community. He is available for speaking engagements. You can always write to Willard at willard@businessbuyingservices.com and he will always answer your questions. He can also be contacted at his Ventura County, California office by calling 800-864-0420.