Buying A Business: Financial Challenges

Buying a business is a huge investment that can have a major impact on you and your family for years to come. And whether you are on the buying or selling end, it’s important to know the types of challenges that you or your potential buyer might face. This will ensure that you have a game plan on how to handle the hurdles.

Financing

Financing a business is not always easy. There may be high upfront costs that may require you or your buyer to take out a loan or deplete your savings. Some banks also require collateral for a business loan, making a new purchase difficult for those with few existing assets. Other considerations include interest rates and loan terms, which can vary significantly from situation to situation.

Cash Flow Management

Even if you or your buyer has the cash to complete a seamless transition, the initial costs are not the beginning and end of cash flow concerns. New and existing businesses alike have operational expenses that never go away. Inventory, insurance, staff … The list goes on. Buyers must be prepared to write checks from day one.

Hidden Cost And Liabilities

Once a business is up and running smoothly, there are still other kinks in the proverbial chain that buyers must be aware of and that sellers must consider before accepting an offer. These include unexpected repairs and maintenance and, for buyers, potentially undisclosed liabilities. As a buyer, you should also know that any safety or environmental violations can be costly to rectify, so do your diligence before you sign the papers.

Other Potential Expenses

Any time you run a business, there is a continual in and outflow of cash. Your expenses may include everything above, plus employee salaries, retention, retraining, branding and marketing, market changes, personal expenses, and the risk of failure.

Mitigating Challenges



As mentioned above, doing your diligence is one of the best ways to sidestep potential challenges. You also need to prioritize financial planning and diversifying your portfolio. First choice business brokers can provide a list of professionals to help you gain a better understanding of your financial situation.

Want to learn more? Contact Russell at First Choice Business Brokers today to talk to one of our experts about buying a business or selling your current business. Our staff can guide you through potential challenges and concerns so that you can make an informed decision…no matter which side of the transaction you’re on.