Buyers' Costs When Buying A Business
Buyers' Costs When Buying a Business
Buyers' costs when purchasing a business include:
- Purchase Price of the business – can be paid for using buyer’s cash, bank loan (i.e. SBA) or seller financing
- Purchase Price of the inventory (if not included with the sale of the business)
- Escrow Fees – Buyers and Sellers typically split the costs of escrow 50/50.
- Sales Tax on Furniture, Fixtures, and Equipment – Buyer is responsible to pay sales tax on the furniture, fixtures and equipment that are included with the business. The sales tax is based on the city that the business is located in.
- Franchise Transfer Fee (if applicable) – Typically, when you buy an existing franchise location, the buyer is responsible for paying the franchise transfer fee to the Franchisor.
- Security Deposit related to Lease of Property where Business is Located – Typically, this can equal 1 or 2 months of rent.
- Working Capital
- Construction Costs (if applicable) – Construction costs can be related to any upgrades you want to make to the location of business (i.e. new flooring, re-design of the space, etc.).
- Advisor Fees (if applicable) – Advisor fees can include fees associated with consulting with your accountant, attorney or financial adviso.
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In the video above, Top Business Broker Lana Hout discusses the different costs that buyers should consider when purchasing a business.
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