The Why Behind Buy-Side Financial Disclosure and Qualification

The Why Behind Buy-Side Financial Disclosure and Qualification

One of the most significant aspects of each business transaction Transworld supports is the decision of how it is going to be funded. This is not only a concern from the Seller's side but also the Buyer's side as well. One of the initial steps, when working with buyers of a business, is to make sure the buyer is financially qualified to purchase the business in which they have an interest.

There are several reasons why a broker will ask a buyer to disclose their financial capabilities before moving forward with a transaction. First and foremost, Transworld is looking for proof that a buyer is in a financial position capable of purchasing the business they have an interest in. If a buyer is not financially capable of acquiring a business than it does not make sense to populate the buyer?s or seller?s time with the discussion of that business. While this may sound harsh to some, Transworld always works to be respectful of their customer?s time, as the sale of a business can be a lengthy process. That being said, Transworld takes each buyer inquiry seriously and would like to point out that even if a buyer is not capable of purchasing one business, there may be another more suitable business opportunity to explore.

Another reason Transworld requires buyers financial disclosure is to make sure the buyer has enough working capital to run the business after they close on it. It would not make prudent sense to purchase a business that one cannot operate afterward. Transworld always want to make sure that someone can not only purchase the right business for them, but they can continue to succeed with operations long after the acquisition.

The final reason behind buyer financial qualification prior to deal negotiation has to do with funding a purchase through outside financing. Once Transworld starts looking at a deal, especially those in the $250,000 and above range, there is a high likelihood that the deal will be financed through an outside source, such as an SBA loan. Because of the outside financing, there are going to be certain requirements that a lender looks to fulfill. We want to make sure that buyers are prepared for the lender's requirements and that Transworld is prepared to help them identify and facilitate the best financing option.

In summary, it is very important to make sure a buyer is well-qualified, financially speaking when looking to acquire a business. Transworld likes to think of this qualification process as addressing potential hurdles up front to make sure a transaction can go smoothly for all parties involved. For more information on the business purchase process please visit our website or to speak with one of our brokers directly schedule a free consultation!

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Matt Prescott is a Broker with Transworld Business Advisors of Denver. After having graduated from the University of Arizona, he initially worked in commercial real estate, later transitioning to sales for a Fortune 300 company based in Chicago. Matt has been working with Transworld since February of 2016 and is knowledgeable in a vast range of business industries. If you are interested in buying or selling a business contact Matt today!