Staged payments for a business

Eliza_2

Reading another thread on here has just made me think, if someone wants to buy my business but pay in instalments, or staged payments, say over a year, is there any safeguard I can make in case they go bankrupt or don't pay or is it a risky strategy?

Thanks

nonnatus

No I don't think so. When I was trying to sell a Business, I had several such "Offers" and declined them all quickly. There is NOTHING in it for YOU other than trouble and strife ahead.


You need an organised, efficient, COMMITTED buyer who has the funds to buy your business when he signs on the dotted line. You don't need excuses over the next year for why payments are late OR, even worse, to be held to blame as to WHY they can't make the instalments because the business isn't making as much money now as when YOU had it!!!!


Shudder...


Stay far away from instalments!

pelirocco

You would have the debt secured against them personally and against the business . It depends if the business has any assets that you could secure against

We bought our business this way , the previous owner wanted the most tax efficient way to sell , and staged payments suited both of us , however it was £1m lol

I do know someone else who sold his business in a similer way , but he has got stung big time

yasmup

Eliza wrote: »

Reading another thread on here has just made me think, if someone wants to buy my business but pay in instalments, or staged payments, say over a year, is there any safeguard I can make in case they go bankrupt or don't pay or is it a risky strategy?

Thanks

The only safeguard you can make is to ensure you retain all rights of ownership over the business until such time as it has been paid for in full. But who knows what state the business will be in if you hand control to someone else whilst they try to raise the funds to buy it?

Seek independent legal advice over such a contract if you wish to follow such avenue.

But my advice would be to tell any prospective purchaser to borrow the money from a bank if the don't have it otherwise available. If the bank won't lend them the money, think very wisely before you do.

InsideInsurance

Its a business contract so you can put in almost whatever clauses you want as long as you can get them to agree to them. You obviously need to give some consideration to the enforcability of them, (eg do you have the funds to cover solicitors or do they have the funds to pay the claim) but even if they arent enforcable they can be worth while having anyway as they can "focus the mind".

It is fairly common when buying a SME, particularly if the existing management are to stay on, to only give a percentage of the money up front and the remainder to be paid proportional to the businesses ongoing success over the next 12-24 months. This has the dual effect of ensuring the management stay focused on the business's success and secondly to prevent you falling for cooked books.

So when Martin Lewis sold this site he got £35m cash, £25m in shares in the new parent company and there is a further £27m cash on hold depending on how the site does over the next 3 years.

Protection against bankruptcy is going to be difficult as there will always be the question of if it failed because the business was simply not sustainable or if it failed because you ran it badly/ hampered the management from running it properly.

CKhalvashi

pelirocco wrote: »

You would have the debt secured against them personally and against the business . It depends if the business has any assets that you could secure against

We bought our business this way , the previous owner wanted the most tax efficient way to sell , and staged payments suited both of us , however it was £1m lol

I do know someone else who sold his business in a similer way , but he has got stung big time

I sold half of a business like this earlier this year; the lady it was sold to runs it (and ran the predecessor when it was under our ownership), but the company may need financial backing, so for us it's the right way.

Get it right, it goes right. Get it wrong..............

CK