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Ways to finance the purchase of a business

| Jun 20, 2017 | Buying & Selling Businesses |

Anyone looking to purchase a business in North Carolina will naturally have concerns about financing. On top of the upfront capital costs, there may be requirements for real estate leasing or purchase, capital improvements and costs to keep on employees and maintain inventory. There are a few typical methods of financing the acquisition. The choice of these can rely as much as on the seller as the buyer.

Seller financing is a popular option when it comes to buying and selling businesses. On the seller’s side, it may mean a better price and a faster closing. The buyer benefits by having a previous owner with an obvious stake in the continued success of the business. If the company were to fail, after all, the seller would be left with unpaid debt or a set of unwanted liabilities.

Debt financing is another option, such as borrowing money from a retirement plan to purchase a business or keep one going in tough times. Debt financing allows total control over the business, but equity capital foregoes debt by giving up partial ownership or control to investors.

For entrepreneurs looking to purchase a business, nearly all financing options will require a standard set of documents. Ensuring these are complete and appropriate to the financing choice can require time-consuming research and legwork. A broker, accountant and legal professional are all helpful for cutting down on time lost to research and potential mistakes. An attorney with experience in the area of business law is well positioned to provide guidance on contracts, help identifying options for financing and referrals to other qualified professionals when necessary.

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