Buying a business: tip #16

Look beyond the down payment

Although the seller always wants more of a down payment and the buyer, less, somewhere in between is fair to both.

In Canada, an amount representing some 30 to 40 per cent of the purchase price is the norm.

You will also, of course, need working capital to keep the business going. Additional inventory may be a priority, as levels tend to be lower when the business is purchased. You may be heading into a peak season.

Given that getting paid can take 30, even 90 days, you may want to secure a line of credit against the receivables.

And it’s always wise to keep something aside for the unexpected.

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