Some of the advantages in acquiring an existing business include:
Being able to review a company's existing track record as reflected in PLs, Tax Returns and other Financial records can be very helpful in determining cash flow available to a buyer. Growth potential can be measured based on actual experience rather than proformas associated with startup ventures.
The need for additional working capital is reduced due to the immediate cash flow being generated by the acquired company. Working capital needs for companies carrying substantial Accounts Receivables can often be addressed and rolled into SBA Loan project costs.
Obtaining trained and knowledgeable employees who are familiar with the business operation, local market and know the businesses customers and vendors.
Gaining established customers significantly reduces the time and marketing costs it would otherwise take to attract an adequate number of customers to support the overhead of a new operation.
Obtaining or transferring existing licenses and permits can often reduce the time and cost of making application, gathering information and conforming to required regulations, not to mention leasehold improvements already in place and operating as a turn key entity.
Sources of capital to purchase existing businesses are more readily available than startup ventures. It is also at times possible for the seller to finance a portion of the purchase price as long as they secure from a collateral viewpoint in their position as a lender. Banks and other financial institutions prefer to loan money for existing operations that have a proven track record than to fund high risk start-up ventures.
