Negotiating & Structuring The Deal

Getting the money to buy a business is, oddly enough, one of the things that many buyers leave for the last minute.

Perhaps it ties into the incorrect perception that traditional lenders have their vaults open ready to hand over money to you to buy a business.

Unfortunately, it is not the case. Not even close!

Today, I received an email from a website visitor explaining he has found a business, negotiated the deal and now is absolutely stunned and stuck to learn that his “investor”, his Uncle Max, doesn’t want to lend him the money.

This financial backer initially told him “I will lend you the money – don’t worry” (I really wish they had read my course because here’s what they would have learned):

If you are planning on having friends or family members finance your purchase, you need to understand it is a business deal.

More importantly, you must be sure that they will be there to write the check when you need it. It is very easy for somone to off-handedly promise you the money, but it is a whole different ballgame when the time comes for them to fork over the cash.

If you are considering getting financing from your “Uncle Max”, keep a few things in mind:

  • Make sure Uncle Max’s criteria for agreeing to finance you is completely aligned with the type of business you are looking to buy.
  • Nail down the deal details with your financier before you begin negotiations with any seller.
  • Lay out very specifically what Uncle Max expects in return for his investment. Is it equity, debt, and what are the note terms, etc.?
  • Involve him in the process. Keep him updated. Analyze companies together. If a particular business is not of interest to Uncle Max, you want to know it early on.
  • Be completely upfront with any sellers or their brokers about the source of your financing. Simply telling them “My Uncle Max has plenty of money and will finance the deal” is not good enough.
  • Get Uncle Max to provide you with a letter acknowledging they will assist in the financing, and have him provide you with a Personal Financial Statement that you can offer sellers as proof to back up your claim.

While family and friends who offer to lend you the money are well-intentioned, and may even come through with the financing, do yourself a favor and don’t put your entire future in Uncle Max’s hands.

There are many options available to finance a business. Learn what these are beforehand. When the right opportunity arises, you want to be in a position to pounce on it and get it done!

I will be leaving for Canada on a personal matter as my father is quite ill. The beauty of my business is that I can operate it from anywhere. However, I am not certain when my next posting will appear, but I do hope to be back on track for the newsletter after Memorial Day. As you may have read in some of my posts last year, I became an American citizen on January 23, 2007 which was one of the greatest days of my life. I waited ten years to achieve that incredible honor. I love this country, and I am totally excited to vote next November. As we “celebrate” Memorial Day, I hope that you too will recognize the day for what it is supposed to be – to honor those before us who gave so much, and paid the ultimate price, so that we can enjoy our freedom. One of my true life heroes is Jerry Efros, who works with Transworld Business Brokers in Fort Lauderdale, Florida. Jerry is a highly decorated WWII veteran and each year, on the Thursday before Memorial Day, I look forward to his sobering, yet somehow uplifting recollection of his military career, and his 33 combat missions as a B17 tail gunner. His stories are bone-chilling. Jerry definitely does not see himself as a hero – he always tells people “the guys that never made it back – those are the heroes.” While Memorial Day seems to have unfortunately evolved into a mass retail marketing event, please be sure that you take the time to honor the day and its true meaning. Regardless of your political beliefs, the fact remains that far too many of this great country’s finest young men and women are stationed away from home today and sacrificing their lives for us, just as others before them have done. Give them their due. We owe it to them. To my friend Jerry Efros, a real American hero, you definitely symbolize the greatest generation – God Bless You!


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