Don’t Let Debt Interfere With Selling Your Business

I speak to business brokers all the time and they all say the same thing: with sharply reduced revenues, the businesses for sale are not worth their asking price. Worse yet, the small business owners are being controlled by their high debt load, higher than the business can support–or is worth–thus the debt is holding the sale hostage because the owner will not sell for less than the debt he owes.

Perfectly good businesses are heading into foreclosure and liquidation because of these brutal realities. The owners cannot sell for the amount of the debt, so they do not sell. Add to this the extreme difficulty of borrowing capital to purchase a business, let alone at inflated prices to cover the debt. The result is very few sales being made compared to the number of businesses on the market.

The answer is simple. The owner must participate meaningfully in financing a sale, taking back significant paper and subordinating to the bank. Further and most important, the seller must perform a debt workout and sell the business without the debt, freeing the business to be sold at a reasonable price. These are the requirements. Even with SBA guaranteed debt, this strategy can work. Call us for a review of your predicament and an analysis of your situation and we will help you, or your broker, figure this all out.