Funding Exit Strategies for Small Businesses
Funding Exit Strategies for Small Businesses
Approximately two-thirds of Australian small businesses are family businesses, but less than 20% of these have an exit strategy.
Of the most common exit strategy options available, the following are when potential new owners or partners seek assistance to fund buying into the ownership.
1 - A friendly sale
This often involves selling the business to an associate, supplier, family member, customer or senior employee. There are both advantages and disadvantages to this approach and it is always a good idea to have a professional third-party, such a business broker, involved to avoid the emotional element of the transaction. Not to mention - it’s essential to have a good formal sale contract if you’re seeking funding, and using a third party will help you with considering this contract against the value of the business.
2 - Putting the business on the market
In our opinion, this is the most viable and often the most considered strategy. Business Brokers have experience with business sales and filtering through genuine buyers while you, the owner, can continue with day-to-day running of your business, adding to the success of your sale.
Why use a Finance Broker?
Funding a business acquisition isn’t always simple. In fact, the strategy to finding a financing solution will depend on:
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The business being purchased
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Any potential franchisee’s structure (if any), and
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Vetting of the Principal Applicant or Guarantors’ business acumen.
While for some, the solution can be quick - for others, solutions take more time to source. A Commercial Finance Broker should be able to provide a strategy to secure the funding as well as provide a realistic timeframe before they proceed with the application process. This way, all parties will be aware of the process journey.
On top of that, the reasons for why the current owner is exiting the business, and any recent new competitors, can also have a significant impact on how the funding of the business is view.
It would be a good idea to have a chat to an experienced Commercial Finance Broker to establish what Lender would be concerned about an existing owner’s reasons for exit so that you can address concerns, if any, to improve your business acquisition financing application.
Successful funding depends on both the business and the potential new buyer.
Of course, there are many other exit strategies. In the end, the best one is planned, considered, right for you, your employees and shareholders, and your goals and lifestyle.
If you’re starting to think about exiting your business, contact us today to discuss your exit options.
Tags: small business selling
About the author
Vijay Reddy
Director and Senior Partner Winquote
I built a seasoned Team based on an impeccable financial background that have the uncanny ability to provide modern SMEs with the solutions that fits ...
