What Paperwork Is Required To Buy A Business?

To buy a business you will likely need to complete several documents.  These documents include a buyer profile, a non-disclosure agreement, proof of financial viability and a summary of experience.  Providing a buyer profile, proof of financial viability and a summary of experience to the broker prior to the start of a search can expedite the process and save you a lot of time.  The broker has spent considerable time learning about the business for sale and documenting the key facts, it is only fair to the seller they document the key facts regarding prospective buyers.

A buyer profile is a one-page summary listing your name, contact information, industry and location preferences, owner benefit required, cash available for down payment, timing, key decision-makers, and other critical information about you, the buyer.  A broker may ask you to complete the buyer profile, or they may complete it for you over the phone or in a face-to-face meeting.

A non-disclosure agreement (NDA) protects the seller and broker for a specified period of time.  These protections include:

1.      Assures you work through the broker and not directly with the seller.  Respect the fact the seller hired the broker to communicate with, and qualify, all prospective buyers.

2.      Informs the buyer all documents containing non-public information are considered confidential and the buyer is responsible for maintaining this confidentiality.

3.      Advises the buyer to seek the advice of their own attorney and/or CPA when purchasing a business as the broker is communicating information on behalf of the seller and cannot guarantee the accuracy of this information.

4.      Informs the buyer should they consummate a deal with the seller and/or landlord without the broker’s involvement within a two years of signing the NDA, they will be liable for damages including commissions due the broker.

5.      Warrants the buyer is acting on their own behalf and not as an agent of a third-party, government agency or competitor.

A signed NDA allows you to receive a business summary, also refered to as a BLI, or Business Listing Information sheet.  A signed NDA does not permit you to receive the name and/or address of the business.

Proof of financial viability is a critical step.  Experience has shown less than 25% of all buyers have the necessary liquidity and/or available funding to purchase the business they are inquiring about.  Sellers have little patience sharing time and confidential information with buyers who do not have the financial means to purchase and operate their business.  Most sellers require their broker to have prospective buyers verify financial viability.  This can be accomplished by one of three methods:

1.      Complete and sign a personal financial statement.

2.      Producing a letter from a CPA or other fiduciary stating you have a specified amount of liquid capital and/or access to a specified amount of funding or they have looked at the terms and conditions of the sale and assure you are qualified.

3.      Statements from a bank, retirement or other savings account.

A summary of experience can be provided to a broker in written format, e.g., a resume, work history or other similar document, or verbally during a phone call or face-to-face meeting.  Most sellers want to be reassured by the broker the buyer has the experience and skills to successfully operate the business.  The more you share about your skills and experience, the better the broker can represent your interests to the seller.

Only after the broker has accumulated the necessary paperwork from the buyer and believes they are qualified to purchase and operate the business, will the broker and seller feel comfortable in releasing the name and address of the business.

Are you looking at businesses to buy and have more questions about the process and what will be required from you? Would you like to know more about the NDA? Feel free to leave us any comments or questions here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com