Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

July 23, 2015

How will a buyer finance a business transaction in New Jersey?

By Achim Neumann

480px-New_Jersey_state_seal

A frequent question we often get from our business sellers in New Jersey is, “how will a buyer finance a transaction in New Jersey ?”

Achim Neumann, President of A. Neumann & Associates, a firm with premier business brokers in New Jersey and offices in many of the northeastern states said, “In times when financial resources are more often limited, a financial structure becomes paramount in facilitating a deal”.  “A few years back, deals would usually consist of 75% cash to the seller and a 25% seller note. More and more frequently, we have begun to see changes to this ratio.”

When looking more closely at a financial acquisition in New Jersey structure a bit further, a lender would normally contribute around 50% to a transaction amount – in the previously mentioned 75% cash. Furthermore, where the industry type might be just one of the determining factors in defining the contributing amount, it has progressively become THE determining factor.

“Businesses for sale in New Jersey that are cash flow-strong and have fewer assets, such as service and distribution businesses in New Jersey, need to be matched with business buyers in New Jersey that have a strong net worth position” says Achim Neumann.  “These businesses for sale in New Jersey tend to have less of an asset base that can be used as financing collateral for a lender.”

Most asset-heavy businesses for sale in New Jersey such as manufacturers—and to a certain degree retailers—have plenty of assets at their disposal to allow a lender to find more collateral within the business, rather than looking at the buyer’s net worth.

In an environment punctuated by more stringent lending criteria, cash flow-based lending is increasingly in retreat and asset collateral, whether from the business/company itself or the investor, takes on a much stronger position.

Another deciding factor is the SBA lending process. However, it is not the cure-all or a majora game changer. “Often, we are approached by business buyers in New Jersey who believe that the SBA pre-qualification of our engagements makes any acquisition possible, independent of the buyer’s finances” says Achim Neumann, “but nothing could be further from the truth in this regard.”

While SBA pre-approval is very important measure for deciding the interest level of banks and the underlying financial requirements for a business sale in New Jersey, at the end of the day, it will not significantly divert from basic lending parameters.

“Our company has had the good fortune over the last three years, that we have had no deals rejected on the basis of financing” says Achim Neumann. “It has always been possible to put deals together with happy parties. Sometimes, it did require a little bit more seller financing, but ultimately, the deal was closed.”

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

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James Belanger, Business Owner

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Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer

“I utilized A. Neumann & Associates to assist in an M&A process. They are VERY thorough in using their time-tested process to calculate the value of investment opportunities, a process which provided a very detailed explanation for the value of the potential opportunity. Additionally, they also went above and beyond to extend other services including connecting with others who specialize in your industry and can assist with necessary steps including legal and accounting. Highly recommended!”

Edward Lane , Business Owner

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Achim, who explained the process in detail. He had his colleague Gary come to my office in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using when the time comes for me to sell my business for max value. They gave me great insight into the steps I need to take now to get the best deal in the future. I highly recommend this firm to anybody who wants to sell now or down the road. They not only know their stuff, their actually just real nice guys.”

Robert Kardane, Business Owner
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