Our team at the business advice blog has just finished our weekly review of the post bag and the most popular topics this week has once again been buying a business. We havev received over a hundred queries this week with people looking for advice on all aspects of this theme. I guess it is not surprising when you consider that it is not something that you do many times in your business life. Add to that the fact that it is a high risk venture and that there is a lot of money at stake, then you can see why people would think long and hard before they sign any deal.

I worked as an acquistion specialist for a large corporation for several years, so I have a different perspective on company acquisitions. I see it as a process – if you follow the usual steps and obey the rules then everything will work out. So what are these steps and rules. Here is a good introduction to the topic by Seth Shah.

Interested in investing businesses for sale? The rewards are high and so are the challenges, but you should decide first if entrepreneurship is your calling. If the answer is in affirmative, then you just have to know some important things before taking the big leap. Discussed below are some key factors that an individual planning to dabble in business for sale should know.

Buy a business for sale or start a new one: First things first, you need to decide that whether you want to invest in businesses for sale or start from scratch. An existing business for sale is a safer option as compared to a new venture. This is because the former has a proven track record which is extremely useful to evaluate the business in question. The products or services offered are already positioned in the market and the price mechanism is in full swing. There will be experienced employees who will be well-versed with the operations of the management and therefore can provide invaluable advice in running the business. Thus, all the factors find favor with a going business. If you have decided to invest in existing business opportunities, then you should read on to know further about them.

Expectations from the business: A buyer needs to ask himself that what does he expects from the business for sale. The person should have the vision to take the existing business to an altogether a new level and earn revenue which, if not higher, but should be equal to that earned in the past. This task requires extremely good entrepreneurship skills and a killer instinct to face all odds against him. Also, the buyer should know beforehand the time and effort that will be required to put into the business for sale to achieve the desired results. The buyer will have certain expectations such as the amount of cash he hopes to take out of the business. This factor becomes even more important in a scenario where the business in question is the only source of income.

Cash needed to buy to invest in business for sale: It may happen that a buyer many find several existing lucrative business opportunities. Here, cash needed to buy is a major determining factor while investing in businesses for sale. Mostly, a part of the total value mutually decided by the buyer and seller is paid in deferred payment. It can be in the form of seller notes or creditors who are willing to provide acquisition loan. In most cases, a cash investment amounting to half or one-third of the purchase is good enough to seal the deal.

Thus, a buyer has to acquaint himself with the above discussed factors before buying businesses for sale.

BuyTradeBiz, a popular business listing website which offers thousands of business opportunities. People can find various businesses for sale and franchise for sale on http://www.buytradebiz.com.

Now just like any business deal the usual rules of caution apply – caveat emptor – let the buyer beware. That is the reason that most people involve a good law firm and a good finance team to do a proper due diligence on a potential acquisition. These people will give you advice on how to structure the deal so that not much can go wrong, and if it does, the business seller can share in the pain. Certainly this type of business advice is invaluable if you are considering buying a business.

As we move out of this recession (we hope!), some business leaders are starting to think about investing in expansion again. Still others are loking to get back into the market in new businesses. One option that is a shortcut to both of these objectives is to find a business to buy. While it does offer a fast way into a market, it is not without risk. That is how advisors and lawyers make all those fees before any deal is inked.

The first step in any business acquisition is to find the finance. Getting your hands on the cash at the right price and on the right terms is as important as how much you pay for the business. I found this piece by Janice Jenkins which has some good general advice about finding business finance.

Banks supply debt financing. This is the awful truth. They do not want ownership (or equity) interest in your venture. They will only lend you money for working capital or for purchasing fixed assets when they have clear evidence that your firm’s cash flow can meet principal and interest payments. They will want to know how and when their money will be repaid, and they will usually want some form of collateral to secure their loan.

You should select a bank and establish good relations long before your need for financing growth arises. The sooner you do so, the sooner you will learn what types of loans and how much credit will be available to you.

Select your bank on the basis of your business or financial needs. You can choose some small banks if you would like to open a small card printing business specializing in business cards printing for example; or flyers, postcards and etc. But if you are planning to put up a manufacturing plant for card printing, then that is a different story. You have to choose major banks.

You should also compare the services offered by the bank and get to know the key officers you will be dealing with. At some early point in the growth of your business, assess their willingness to lend you money. Show them your business plan and keep them informed of financial developments. Invite them to see your business in operation during the start-up phase. After you have selected a bank, do all your business banking and personal banking there. Do not split your accounts among banks.

Here are some more types of financing a bank supplies that you might need:

Short-term commercial loans. These are the most common types of loans to small businesses. The loans are for short periods – usually for 30-180 days. They are generally made to cover seasonal or other temporary needs for personnel or inventory. Repayment is usually made in lump sum, which includes interest.

Longer term loans. With longer repayment terms up to five years, these loans have a regular repayment schedule, usually monthly, including interest to date, plus payment against principle. These loans are for such purposes as buying fixed assets, equipment, or other items for business expansion.

Accounts receivable financing. Banks will often lend money on your accounts receivable if they are pledged as collateral. You must pay the bank if the accounts pledged are not paid on time. You would still own the receivables and would yourself go after the customer for collection. This type of financing is frequently used by small retail and service businesses for purchasing additional operating inventory or operating supplies.

Other types of financing. Commercial banks will lend money for building construction or improvement and for buying land. The loan is usually long term and is always secured by the asset for which the loans were made.

Banks provide valuable services that will help you expand your business. They can perform credit checks for sizing up potential large customers. The bank can help you develop a financially sound product leasing plan to offer customers if you market capital equipment. Larger banks have international departments that can assist in product exporting or importing. Banks increasingly offer their commercial customers payroll accounting and data processing services at competitive rates.

Finally, your loan officer may prove to be a valuable business adviser in helping you locate sources of additional business, in dealing with overdue accounts, and in setting up your accounting system. Cultivate good relations with your bank and your banker; and you will certainly benefit – a lot – from the relationship.

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There are a lot of things to consider when embarking on a project to buy a business, but getting access to funds must be near the top of the task list. If you end up paying too much interest, the financial logic of the deal can be destroyed. Equally, if the finance house want too much control and oversight, then you can end up feeling that you are working for them and not for yourself. I know one person who got a loan to buy a business and ended up spending 50% of his time writing papers and reports for board meetings as the bank appointed two non-execs to review his business plan monthly. It is just not worth that hastle.