To achieve a successful business partnership buyout, there are a number of financial intricacies that must be handled. If you do not have cash on hand to pay your partner, financing a business partner buyout can be difficult. But, seeking funding to buyout a partner can be done, even if it might not be easy. You need to know exactly how much your business is worth to determine a fair price for your partnership buyout and to make sure buying out your business partner is a good long-term investment. To find out, hire an independent valuation firm to perform a formal business valuation. It is also in everyone’s best interest to hire an experienced acquisitions lawyer to negotiate your buyout, even if your relationship with your partner is amicable, to ensure your buyout appropriately honors the initial partnership agreement, conforms correctly to state and local laws, and all parties understand and agree to all the terms. You will be ready to make your buyout official once the terms have been negotiated and all parties are on board with the new agreement. All necessary paperwork must be filed with federal, state, and local authorities. Make sure the former partner’s name is removed from all accounts, then transfer all business related accounts.
Lenders look for ways that the capital will boost profits for your business when considering a partner buyout loan. They will want to see a formal evaluation of the business to ensure the amount they are lending is, in fact, appropriate. Lenders will require a credible business plan, two or three years of financial reports, your annual revenue, credit score, bank statements, and balance sheets. These will act both as proof that your business was profitable in the past and as insurance that you’ll continue to be profitable in the future.
• An outside valuation will protect you and your partner in the event the exiting partner claims he did not receive fair value.
• Hire an experienced mergers and acquisitions lawyer.
• You can also leverage business assets to get the cash needed to buy out your partner if your business has sufficient assets, and use the business' cash flow to repay the loan.
• Check your monthly payments with our Business Loan calculator.