Business Financing Services is one of our service areas that we are always asked for insight and guidance on. For this month’s column, we answer a very common question related to succession planning and financing. Continue reading below as Doug Gober, Partner provides some insights.
Question: I am ready to sell my business to my son. How can he secure the financing necessary to buy my business?
Doug Gober: Many potential business owners who need to transition their businesses are convinced that either their children or key person can’t secure the financing necessary to transition the business to them. With the sellers help and understanding of the process, the lending is available for the next generation of independent business owners. On a regular basis, we are assisting in securing financing which allows for independent funeral service to continue. The idea that a buyer must have significant personal wealth is simply incorrect.
There are two things that most lenders really want to confirm as it relates to potential borrowers. Even though there is a lot of detail necessary, two elements are crucial.
#1: What is the credit worthiness of the borrower? This is not a question of how much money they have. It is a question of their credit status.
#2: Will the historical cash flow of the existing enterprise to be purchased support the debt that is to be incurred?
Even though the banks will require a lot of detail to support this venture it really boils down to these two issues.
In the last decade I have been involved in securing financing for over $175,000,000 in funeral home and cemetery transactions. The majority of my work has been dealing with independent owners and buyers. If you take away one thing from reading this, it is that it can be done. We can help. We can do this together.