The power of the word No when selling a business is immense. It is especially true in this difficult economy. In a normal market it is difficult to sell a business but the current market has a few more challenges. Let's have a look why.
To sell a business you need a buyer or nothing will happen. To be more accurate you need a buyer that is motivated just as you need a seller is motivated. A judge once made a ruling that is known as Revenue Ruling 59-60 that I've abbreviated that says Fair Market Value is "the price at which the property would change hands between a willing buyer and a willing seller when neither party is under any compulsion to buy or sell nor both parties have reasonable knowledge of the facts."
That sounds easy and simply enough but when selling a business or buying a business, as both parties soon find out, there is much more to it and can get complicated. The first complication comes along when there is a landlord. A landlord is in the business of making money by renting or leasing their real estate. A landlord is under no obligation to accept the buyer and allow the lease to transfer from the seller. A landlord has their own risks and responsibilities they need to manage. To help them do this they will ask the buyer to provide a personal financial statement, a copy of their credit score and credit report and other personal information they decide is necessary. The seller can think the buyer will be a wonderful tenant but if the landlord disagrees you have your first no.
If the buyer needs to obtain finance to buy the business, you are now looking at your second no. The banks are reluctant lenders in this current economic environment. There is no question it is getting better but over the last few months I have been working with SBA lenders and I have finally been successful at bank eight. That is, after a no from seven different banks I was finally able to get a yes from bank number eight. And this is not unusual. Part of the reason the banks are cautious with the loans they approve is because each bank has a slightly different focus. What it may take to get a yes from a bank is the geographic area they are willing to do loans, the industry of the business, the management experience of the buyer, the credit score and credit report of the buyer. Some banks are no longer willing to approve a loan to a buyer if they have ever had a bankruptcy or have a poor credit score. These are some of the factors and there are others so getting a yes from a bank takes hard work and persistence, plus a business they like and feel they understand.