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B2B Business Opportunities
By Gregg Elberg
Why Should You Buy a B2B Business?
Buying an existing business is often a simpler and safer alternative to starting your own business. There are more financing opportunities available for the purchase of a B2B business compared to buying a business that only sells products or services to consumers.
Advantages
Time, money, and energy are required to startup or purchase any business. If you start with a new service, concept or an invention, you should be prepared to self-finance the business costs and your living costs for two or three years. When you purchase a B2B business, you can finance 80% to 100% of the purchase price with commercial financing.
Cash flow will start immediately with existing inventory, accounts receivables, an existing staff, business clients, and customer goodwill. You can finance your growth.
Disadvantages
The initial purchase price requires a cash down payment. Additional operating capital may be required during the transition period as you establish and implement your new business plan. Since the customer base, brands, and other fundamental work have already been done, the down payment may be substantial. The purchase price may be excessive. Inventory may be over-valued and accounts receivables that are valued at the time of purchase may turn out to be not collectable. Business brokers and consultants can help to avoid these problems.
Opportunities for Growth
You should determine your target company's readiness to expand its operations locally, nationally or internationally and ascertain its ability to increase production of a particular product or service. You should systematically and objectively identify your target company's strengths and weaknesses concerning these issues.
Financing Opportunities
When you purchase a B2B business with commercial financing, a Financing Statement (Form UCC1) is filed to perfect a security interest in named collateral, such as accounts receivable, inventory and equipment. The UCC1 establishes priority for the lender in case of your default or bankruptcy. It is a first lien on the business assets.
Many banks offer SBA 7(a) loans for Long Term Financing of:
• 51% or more Owner-Occupied Commercial Real Estate Purchasing & Refinancing
• Construction or Improvements
• Debt Refinancing
• Working Capital
• Equipment Financing
• Purchasing a Business
• Partnership Buyout
The SBA 7(a) loans provide for fully amortized maturities up to 25 years. Through their partnership with the SBA, banks can provide up to 90% financing for the purchase of Commercial Real Estate and up to 90% financing for debt to finance the purchase of a business. A UCC1 is required as a first lien on the transaction.
Many commercial finance companies offer accounts receivable financing, inventory financing and equipment financing to help B2B businesses grow. A UCC1 is required as a first lien on the transaction.
Both types of financing are available with proper structuring and negotiation if you purchase a B2B business. The SBA 7A loan may be obtained to purchase a B2B business with a carve-out for the commercial finance company to have a UCC1 lien on their portion of the financing. With financing for growth combined with financing for the purchase of the business the opportunities for success of your business increase. The advantages are: you can market for new business; accelerate cash flow to meet payroll, supplier and tax obligations; and have the opportunity to negotiate larger contracts for your products and services. If you purchase a B2B business without the carve-out, you may have closed the door to financing for future growth.
Copyright 2007 Gregg Financial Services
http://www.greggfinancialservices.com
About the Author
Mr. Elberg is a licensed attorney and licensed real estate broker. Gregg Financial Services is a full service brokerage for commercial finance companies and banks that fund B2B businesses. Mr. Elberg arranges funding from $25,000 to $50 million per month at competitive pricing.For more information about GFS, please visit our website: http://www.greggfinancialservices.com
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