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Escrow Agent in the Sale of a Business

Escrow Agent in the Sale of a Business

When a business is about to be sold, the parties to the sale may find it beneficial to establish an escrow agent to handle the transfer of certain assets and cash between the buyer and seller. Many times the parties agree to use the escrow account held by one of the party’s business attorneys. However, in many cases the parties prefer to hire an independent escrow agent to handle the assets and cash that will change hands.

Important Agreements When You Sell Your Business

Important Agreements When You Sell Your Business

When working through a business sale, an inordinate number of resources on both sides of the table are dedicated to drafting and negotiating the Stock Purchase or Asset Purchase Agreement. This is true especially in the last one-to-two weeks before the closing. In fact, I’ve had clients remark that during their entire tenure as an entrepreneur, they never spent as much time speaking to their advisors as they did during the last week of their business ownership journey!

Mezzanine Debt Definition

Mezzanine Debt Definition

In its purest form, Mezzanine Debt is a business debt instrument that carries along with it certain rights to convert debt into equity (stock, common shares, partnership interests, LLC membership units, etc.). Mezzanine debt financing is not a pure debt or a pure equity instrument. It is something in the middle. In fact, the word ‘mezzanine’ is derived from the Italian word ‘mezzano’, meaning middle, and is used to describe how this particular form of business capital combines elements of both debt and equity financing into one instrument.

Latest Forbes Post: ACA Grandmothered Plans Help Small Business

Obamacare was promoted to the approximately 5.8 million small business owners in the U.S. as a mandate which would not apply to them, nor result in a penalty if they chose not to offer health insurance to employees. Unfortunately, for those same small business employers who previously offered health insurance coverage as part of an employee’s total compensation package there is no place to hide. Premiums are skyrocketing.

How to Calculate Debt Service Coverage Ratio [Tool]

How to Calculate Debt Service Coverage Ratio [Tool]

Debt Service Coverage Ratio compliance often is required or necessitated by covenants in a bank loan agreement. A bank loan covenant regarding the debt service coverage ratio will specify the amount of income a business and/or its guarantor must generate relative to the debt principal and interest payments on an annual basis to remain in compliance with the covenant. The business owner, or his or her CFO or Controller, should monitor this ratio carefully on a monthly basis so the covenant is not unintentionally broken.

What is a Debt Service Coverage Ratio?

What is a Debt Service Coverage Ratio?

The debt service coverage ratio is a measurement used by lenders to determine if a business is able to meet its debt servicing obligations through its operating income during a given period of time. In most cases, a lender wants the operating income to exceed the debt servicing costs by some measure. This ratio defines the extent to which a business’s operating income (or other defined measure of cash flow) exceeds the cost to service its bank loans.

Latest Forbes Post: Bank Loan Alternatives in 2014

Finding money to grow a business has changed tremendously since the great recession. Whether sourcing capital in the form of debt, equity, or something in between, also known as mezzanine, it’s safe to say entrepreneurs have more multiple options than ever to pursue. That doesn’t make the task an easy one to accomplish. Unfortunately for the entrepreneur, the additional options have only served to increase the confusion surrounding their need for cash.

Surviving Due Diligence & Contract Negotiation

Surviving Due Diligence & Contract Negotiation

You have endured multiple meetings with potential buyers. You’ve written dozens of emails and suffered through several rounds of negotiations to secure the best price and deal structure. At last you have decided on the offer to accept. That’s the worst of it over then? Think again – you have yet to experience the joys of due diligence and sale contract negotiation.

Going After the Next Opportunity

It’s the late 1980’s and Bill Hinchey just saw his young company, Solar Care Technologies, featured in a complimentary Wall Street Journal piece. Hinchey, along with two other guys he met while working for consumer products giant Proctor and Gamble, had recently set up shop in a business incubator in Pennsylvania’s Lehigh Valley to develop a sunscreen towelette.

Non-Solicitation Agreement | How to Keep Your Best Employees

Non-Solicitation Agreement | How to Keep Your Best Employees

If you’ve grown a valuable business, there is no doubt your employees are a big part of your success. You also know that hiring, training, and managing a great team of productive employees is a difficult task. And keeping your best employees is yet another accomplishment! But the painful truth is your competition would be very pleased to hire away your best employees.

It Takes a Village to Sell a Business [Infographic]

Selling a business is one of the most exhausting endeavors an entrepreneur will undertake. Unfortunately, many simply do not succeed. In fact, only one out of ten entrepreneurs will actually complete the business sale process and transfer their business to another. Selling a business involves many different parties, all of whom have a special role and a unique skillset. Most importantly, they must all work together. Those entrepreneurs who succeed recognize ‘it takes a village to sell a business’.

IMPAQT’s Richard Hagerty | Exit Interview: Emerging Market Opportunity

This three part series tells how one entrepreneur took a chance on an emerging market, weathered an economic storm, and exited with a bright future.

Right Place at the Right Time

It almost seems like cliché advice a commencement speaker would offer to a group of graduates.

Keep your ear to the ground, work hard and always be on the lookout for the next big thing. And when that next big thing does indeed come, don’t be afraid to take a chance on it.

Do You Recall the Laughter of Your Childhood?

Do You Recall the Laughter of Your Childhood?

Recently I took my nine year old daughter and a carload of her friends to our town’s Volunteer Fireman’s Carnival for an evening of ferris wheels, funnel cakes, and laughter–of course! It was a Friday night after a long week. Truly, I would have benefited from a simple dinner at home to unwind from the week. Sound familiar? However, I intuitively knew that the laughter of those children was most important and desperately needed…so off we went.

How to Increase the Value of Your Business

How to Increase the Value of Your Business

The best solution to a problem lies in uncovering what the root cause of the problem really is. So often, this is the case when an entrepreneur is struggling with profitability in their business. Over the past few posts, we have discussed the concepts of how a minimum order policy and Pareto’s Principle applied to the customer/client base can be very powerful to help an entrepreneur improve the value of their business.

The Importance of a Minimum Order Policy

The Importance of a Minimum Order Policy

Most entrepreneurs find themselves extremely reluctant to turn away an order for any reason. The notion of telling a client or customer that their business or order is too small is frightening to even the most seasoned entrepreneur. However, if you don’t want to leave money on the table, and instead desire to make more profit, setting and enforcing a minimum order policy is absolutely necessary!

Kauffman Foundation Venture Capital Report: Will VC Be Your Super Hero?

I continue to be surprised as I meet with entrepreneurs who truly regard Venture Capital as their Holy Grail. It’s as though they are looking for a Super Hero to make their dreams of entrepreneurial success come true. But having spent more than a few sessions on the entrepreneur’s side of the table in negotiations with venture capital firms, I know better. And it seems there are others who share my opinion!

Bank Alternatives: Sourcing Business Capital When a Company is Not Bankable

Bank Alternatives: Sourcing Business Capital When a Company is Not Bankable

Often entrepreneurs find themselves in a situation where their commercial bank considers their existing line of credit too risky to extend or renew. This places the entrepreneur and their banker at odds, and many times pushes the business owner to take drastic steps to keep their company’s doors open and paychecks coming. Has this happened to you or one of your fellow entrepreneurs?

Business Is Personal, According to the Entrepreneur

Business Is Personal, According to the Entrepreneur

Just recently, one of my colleagues Bernadette, whom I have known for several decades, called me for help. As I listened intently on the phone, this successful woman entrepreneur shared with me that one of her biggest clients said something to her that was devastating. Before she even began to share her story with me, I could tell by the tone of her voice she was very upset.

Defining the Indemnification Basket: Deductible Baskets & Tipping Baskets

Defining the Indemnification Basket: Deductible Baskets & Tipping Baskets

The “indemnification basket” is one of the most important deal terms found in the Letter of Intent and ultimately in the Purchase Agreement and is often misunderstood by both the buyer and seller of a business. Buyers want the basket to be as low as possible and Sellers want it to be as high as possible. Baskets may be one of two types: a deductible basket or a tipping basket.

5 Common Mistakes When Starting a Business

5 Common Mistakes When Starting a Business

It never ceases to amaze entrepreneurs how certain seemingly simple decisions, made during the early years of their business startup, can become fatal errors down the road. After meeting with many business owners across a broad spectrum of industries it’s common to find them enduring the consequences of the same, or similar, errors over and over again.

3 Great New Years Reflections for Entrepreneurs

3 Great New Years Reflections for Entrepreneurs

Just a few days before everyone rings in the New Year, I have a ritual that I undertake and enjoy immensely. It doesn’t involve highly caloric food, expensive Champagne or making a resolution. I have shared my New Year’s ritual with successful entrepreneurs and have always received a positive response. It’s really simple. It requires you to ask yourself three questions. What happens next, is up to you.

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