With the present economic uncertainty, you are not sure of whether to invest in a business or not. It is therefore important to note that many would-be entrepreneurs are not willing to enter into business with an economic downturn faced with many risks and low-profit margins. Many would rather develop a wait-and-see attitude before they make a plan to invest in a business.
During hard economic times, there are distressed sellers out there willing to sell their investment at a lower price than what they might otherwise get when the economy booms. Businesses that sell during low economic times have an urgent need to fulfill and cannot wait to sell when the economy improves.
For buyers, this a window of an opportunity to invest. When the economy improves, credit will be available and buyers will flood the market, pushing up prices for buying businesses.
Buying a business requires money and with a sluggish economy, banks are hardly giving out loans. To sell his or her business, a business owner has two options to consider: lower the asking price or negotiate with the buyer and provide seller financing. Seller financing negotiations include an agreeable amount of deposit from the buyer, how long the loan will take to pay, monthly installments and applicable interest rates. It has become a reality these days that companies are being bought without bank lending. Seek legal and financial advice before engaging in this type of transaction.
Seller financing is where the seller provides credit to potential buyers, who are unable to secure loans from banks during tough economic times. This setup mutually benefits the business buyer and seller, as the seller has vested an interest in the business that after you buy a business, your success depends on your ability to pay back the loan.
Below are reasons why you should invest now:
- Buying a business during the first few months of the year is some of the best times so that you have an established customer base and the business is up and thriving.
- Many talented, experienced individuals are out of employment by the unfavorable economic times. Utilize this time to tap these leadership skills to drive your business.
- At the moment, the market favors the buyers because prices of goods and service have gone down. When the economy improves, the price of everything will go up.
Buyers should not wait for the economy to turn around, but spend during the period when the economy is down. Most businesses that start during low economic time have proven to thrive when the economy improves. It gives new business owners more opportunity as the market share increases because buyers of products and services are more concerned about expenses. Suppliers will make lower offers as they look for markets for their goods, giving business customers access to most major bargains. Remember, when looking for a business to purchase, you are not forced to make an offer.
Investors who gain knowledge and concentrate managing resources during the hard economic times are likely to use those skills for greater business growth as the economic environment improves.