Understanding Buyer Expenses Beyond the Purchase Price: What to Expect

When you're in the process of buying a business, it's essential to understand that there are expenses beyond the purchase price that you'll need to consider. These additional costs can vary depending on the specific deal and business, but being prepared for them is crucial for a smooth transition. Here are some common expenses that buyers should be aware of:

1. Attorney and Accountant Fees:

• Legal Guidance: It's highly recommended to hire an attorney and accountant experienced in business transactions. Their fees are essential for ensuring the legality and financial health of the deal.

2. Loan Costs:

• Financing Expenses: If you're obtaining a loan to finance the purchase, there will be associated costs, including loan origination fees and interest.

3. Business Formation Costs:

• Entity Setup: Depending on the structure of the business (e.g., LLC, corporation), there may be costs associated with forming or registering the new business entity.

4. Licensing Fees:

• Regulatory Compliance: Some businesses require licenses or permits to operate legally. Be prepared to cover the fees associated with obtaining and renewing these licenses.

  
  

5. Bulk Sales Tax Fee:

• Asset Purchase Tax: In some cases, a bulk sales tax may apply when purchasing the assets of a business. This fee can vary by jurisdiction.

6. Banking Expenses:

• Opening an Account: You'll need to open a business checking account, which may involve account setup fees or minimum deposit requirements.

7. Security Deposit on Lease:

• Lease Considerations: If the business operates from a leased location, you may be required to pay a security deposit to the landlord.

8. Franchise Fee:

• Franchise Fees/ Transfer Fees: If the business is a franchise the franchisor will likely have a franchise fee or Transfer Fee that will need to be paid when purchasing an existing franchise. There is also the possibility that you will have to pay to train with the franchise at the franchise headquarters.

9. Working Capital:

• Operational Funds: It's essential to have working capital on hand to cover initial operational expenses, such as inventory, employee salaries, and marketing.

10. SBA Financing:

• How much capital is enough?: Many buyers want to go the SBA route to acquire a business thanks the the SBA 7a program that allows 10% down and 10 year amortization with loans up to 5MM. It has been our experience that a buyer will need 25% of the total purchase price in liquid capital available to safely get a deal done.

Being aware of these potential expenses as a buyer is crucial for budgeting and financial planning. Keep in mind that the exact costs can vary widely depending on the nature of the business and the terms negotiated in the purchase agreement.

If you're considering buying a business in New York and have questions or need guidance on navigating the complexities of the buying process, consider reaching out to Sam Curcio, a trusted business broker in New York. Sam can provide valuable insights and assistance to ensure a successful and well-prepared business purchase.

Are you looking to buy a business in New York? Contact Sam Curcio today for expert guidance and support tailored to your needs.