How are Accounts Payable/Receivable Normally Handled in the Sale of a Business?
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Question:
What is a common practice for dealing with accounts payable/receivable when purchasing a business?
Answer:
In nearly all small business sales, the seller will retain the cash and accounts receivables, they will pay off the payables, and deliver the business "free and clear" to you.
In larger purchases, the buyers will likely acquire these balance sheet items to provide them with immediate working capital. However, unless it is an especially large or complicated deal, you will usually not take the AR at closing.
With this being the norm, be certain that you have ample working capital available.
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Richard Parker author of: How To Buy A Good Business At A Great Price(TM), the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center. Richard Parker is also the author of BizQuest's Business for Sale Blog |