Business Law – I’m Considering Buying A Business And I Don’t Have All Of The Money Upfront; What Are My Financing Options?
- It is very difficult to get a bank to issue loans on businesses as it not a secure enough investment.
- The only type of lending institutions that would lend would be if someone is a big-time investor and has lines of credit in banks.
- For a general mom-and-pop businesses, the only way that the transactions usually are concluded is either with the buyer paying all cash, certified funds part certified funds and the seller is financing part of it, that’s called “notes,” or “promissory notes.”
- Sometimes sellers are willing to do it that way because a seller is faced with tax consequences of selling a business and realizing a gain.
- In this case, if a seller doesn’t want to pay all the taxes associated with realizing a tremendous gain, they can defer part of the taxation by taking notes.
- Sometimes a seller requires all of that money up front because they’re retiring, moving out of state, or moving out of the country, and they want all that money.
- Conversely, there are people who are retiring, and they’d like to have that monthly income associated with notes so different types of scenarios, but these are things that have to be negotiated between the buyer and the seller when negotiating the price.
This short informational legal video was provided by Arnold Drucker, an experienced Jackson Heights Business Lawyer.