In some cases it may be your children, or a group of them. It may also be a combination of managers and other investors. In the small business context, the typical LBO buyer is one or more of your managers or key employees who wants to take over after you retire. Lending criteria are stricter, now, and buyers are expected to put up more of their own money (or find a partner who's willing to). LBOs were once very common, but many lenders have been stung as buyers tended to default when things got tough, or had such difficulty making payments that lenders were forced to restructure the loans. When an outside lender such as a bank or investment firm finances the purchase of a business, the transaction is frequently called a leveraged buy out or LBO. Using outside lenders to finance the sale If the buyer is planning to obtain outside funding, the bank or other lender should confirm to you that the buyer is qualified and that the lender is willing to come up with the money before negotiations go too far. The other option is for the buyer to obtain third-party financing. If you're not willing to finance at least some of the price, you may not be able to sell your company. Seller financing is involved in up to 90 percent of small business sales and more than half of mid-size sales. It is important to know what you are getting into if you finance any part of the sale. Generally, the money will come from either third-party financing or seller-financing or a combination. Therefore, you'll need to know where the buyer is going to get the money to purchase your business. Business sales are rarely completed without some type of financing.
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