As a buyer, how much down payment will I need?
The amount of money that is needed for a down payment varies depending on the type of business, the sellers situation and the buyers down payment ability. The down payment is tremendously important negotiation tool. Typically, the higher a down payment the buyer can offer a seller the lower the total sale price of the business. When investigating opportunities, it is important to remember that you should not commit all of your available cash to a down payment This is important because, cash is needed for operating capital, deposits, and other business requirements. In addition, you have to be sure that you have money set aside for emergencies and unforeseen situations. If you are planning on financing the purchase of your business, you can expect that lenders will require buyers have 15 to 30 percent cash invested in the company. If the purchase is being financed by the current owner, the down payment required will vary depending on owners financial situation. However, a good rule of thumb is to expect to pay 1 to 1.5 times the annual owner's discretionary income as a down payment Capital Advisors will advise potential buyers as to the appropriate down payment and cash reserves.
|
