| With the state of the world economy in a | | | | than the virtual or intangible asset of the website |
| seemingly endless free fall, the climate in the | | | | itself! |
| business for sale market place has cooled along | | | | This has now created a major trend towards |
| with many other industries. There is a lot more | | | | seller financing in order to successfully close a deal. |
| caution and fear in the market, with buyers | | | | There are several advantages to this type of |
| selecting only the most resilient of opportunities | | | | structure. First, the deals close much quicker. SBA |
| that have been able to weather the financial | | | | loan transactions can drag on for 3 - 4 months |
| tsunami. | | | | before they are fully funded. Seller financed deals |
| Consequently, there are many more sellers | | | | can close quickly because they are less formal |
| emerging from this morass, listing their businesses | | | | and the collateral is the website business which will |
| and hoping to find a buyer to cash them out so | | | | be repossessed if the buyer defaults. In addition, |
| they can consolidate and protect their wealth | | | | the seller can earn a much better interest rate on |
| during these uncertain times. | | | | the balance than they would in the bank or a CD |
| On the other hand, there are fewer buyers with | | | | or treasuries, so they will actually earn more in |
| the available capital to consummate a deal with | | | | the long run, especially when the tax implications |
| the sellers. To make matters worse, the tight | | | | are considered. Taking monthly payments, as |
| credit markets have all but assured that available | | | | opposed to one large lump sum at close, can |
| credit previously easy to attain, has all but dried | | | | defer taxes and potentially reduce the tax |
| up. In fact, the SBA arm of the government that | | | | bracket and consequent liability over the long haul. |
| guarantees small business loans through the banks | | | | The perceived disadvantages are added risk of |
| has recently curtailed their criteria that literally | | | | default, longer payout time frame, and lower cash |
| handcuffs most qualified buyers from acquiring | | | | at close. Risk can be mitigated based upon the |
| financing. | | | | strength of the buyer and their credit rating and |
| In essence, they have determined that a | | | | history of prior entrepreneurial success. Owner |
| business's goodwill can only represent up to 50% | | | | financing is only appropriate with the most qualified |
| of the value of the total business appraisal or a | | | | of candidates and with a reasonable % paid at |
| maximum of $250,000. The balance needing to | | | | closing. The typical percentage of owner financing |
| come from tangible assets such as real estate, | | | | occurring now is 25% -50% with a few rare |
| equipment, computers, inventory etc. This means | | | | exceptions of up to 75%. |
| the virtual tanking of any hope for website | | | | In the end, both parties who want to get a deal |
| business buyers wanting to finance internet | | | | done need to make compromises so they can |
| businesses because the majority the valuation is | | | | achieve the mutually desired goal of completing |
| going to be goodwill based off cash flows rather | | | | the business for sale transaction successfully. |