When you buy a business, don’t just think about buying the goodwill and the equipment and hiring the key people, consider where your working capital is coming from. If you don’t plan on where it is coming from, you may have to provide it out of your cash after the sale closes. The typical sources of working capital are the seller, a lender, or you. Which of these sources is used depends, to some extent, on the size of the business being sold.Read More
BayState Business Brokers Blog
There are a variety of ways to handle the sale of working capital when buying or selling a business. In accounting terms, working capital is the difference between current assets and current liabilities. By working capital, I’m generally referring to the sale of inventory and accounts receivable when a business is sold. Here is a short primer on the most common ways the purchase of working capital is handled in the sale of a business.