How to Make an Offer to Purchase a Small Business

Buying a small business is a unique process in many ways. Here is a list of “elements” of a contingent offer that might make sense when considering a purchase.

Contingencies are very important when making an offer. A buyer is not likely to get full access to all of the business books and records without first agreeing to a purchase price and terms CONTINGENT on full due diligence. Contingencies to consider when making an offer:

  1. Small Business Financing – If you will need financing include a contingency for obtaining small business loans on terms and conditions acceptable to you.
  2. Include a contingency for buyer and seller to agree on a specific training and transition plan.
  3. Contingency for any agreements to be assumed by buyer to be on terms acceptable to buyer (example, facility leases, copier contract, machinery leases, etc)
  4. Contingency for background check on the business and the seller’s themselves. It’s important for buyer to know who they are buying the business from.
  5. Contingency for full review of all business records including tax returns, sales tax reports, bank statements, etc.

As always, reassure the seller that you understand the confidential nature of this information. Those 5 contingencies above are a start to buy a business, some specialized businesses require more specialized contingencies. For instance there could be a case where a particular supplier is extremely important to the business, a contingency might be for the vendor to approve buyer and agree to continue to supply the buyer after closing.

These kinds of 3rd party approvals can be very tricky, get good advice before heading down this path. Think through your small business ideas and build your contingencies to make sure that you’ve covered all the bases.

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