Top 10 Things To Know When Selling A Business In Orlando to Foreign And International Buyers.
After listing and selling hundreds upon hundreds of businesses sellers still ask us if we work with foreign or international business buyers. We do! It’s a common question in the Orlando and Central Florida area because we get millions of visitors a year and everyone always seems to be from someplace else. While we do not always know their rationale, we always get the impression that business sellers feel it might be an easier sale or that an international buyer will pay huge premiums for a business. Many of the notions and rumors out there might not be true so we felt it would be good to the list the Top 10 Things To Know When Selling A Business To Foreign And International Buyers In Orlando. This can help business owners sell a business in Orlando or the Greater Central Florida area.
Below are some things to keep in mind when putting your business on the business for sale market geared toward international and foreign buyers:
1. Practically all foreign and international business buyers are seeking to get some sort of investor’s visa by purchasing a business whether it is an L1 Investor’s Visa, E2 Investor’s Visa, or other type of visa.
This means that they need to meet the qualifications for getting an investor’s visa. While the right business plan or a buyer with a great deal of assets behind them, you will find that most foreign business buyers will be working with immigration attorneys. Most of these attorneys will mention that they would like to see a business that has clean books and records showing profits and a business that employs two or more employees on the books. U.S. Embassies in each county go by slightly different standards and while they are not set in stone these are pretty basic rules of thumb that seem to work. The more on the books, the better the business looks on paper, and then the better it looks for the buyer’s investor’s visa application.
2. Foreign and International business investors in Orlando want a legitimate business just like American domestic buyers, so not just any business for sale will work.
In fact, most foreign buyers look for the same things in an Orlando business for sale that domestic American buyers look for in a business. Good books and records, an easy to understand operation, well-located facility in addition to a transferable business system. Perhaps five percent of foreign business buyers in Orlando might be okay with a weak unprofitable business operation if its super, super cheap just to get their visa, but it’s a rare occurrence more and more. Most foreign and international business buyers in Orlando want a documented and legitimate business system to purchase.
3. Books and Records still matter to foreign and international buyers.
If you are not reporting your revenue or profits correctly, you will not be able to sell your business easily to a foreign or international buyer in Orlando (or even a domestic buyer). Keep in mind that these buyers already have enough to worry about with the expense and learning curve that comes with moving to a completely different country. They do not want to worry about a business that may or may not be making what the business seller states. Also keep in mind that many countries including those in Europe are far stricter on businesses and do not allow business owners to make many multiple deductions or take money off the books. Since many international buyers are business owners in their home countries, they simply are not accustomed to record keeping where most of profits are hidden or not reported.
4. Lack of credit history, lack of social security numbers, and lack of assets in the U.S. can make it more difficult for some foreign buyers coming to Orlando to obtain leases, lease assignments, vehicles and other types of a credit a business might require to operate.
Foreign investors will not have all of the resources that domestic business buyers have access to. No credit history means it will be difficult for foreign buyers to buy inventory on credit or do any kind of factoring or financing extra vehicles. Another scenario that often occurs in Orlando is that a foreign business buyer in Orlando might be required by a landlord to put down a much larger deposit than a domestic buyer due to a landlord deeming them a higher risk. For example, a domestic buyer might have to put down two months worth of rent for a deposit and a foreign buyer might be required to put down four months worth of rent for a deposit in order to rent the same space. Credit lines and equipment purchases with financing is also more difficult for foreign buyers so if an owner is looking to sell a business to an international buyer it would be best to address these issues from the beginning. If the business is hard to run without credit, then this issue needs to be taken into consideration when marketing the business for sale.
5. Foreign and international buyers often do pay all cash for businesses they purchase.
This can be a huge bonus for a business owner, especially in circumstances where a business will not qualify for SBA bank financing. While most foreign investor visa business buyers pay cash, some owner financing from the seller is still allowed depending on the deal. Our sources tell us, up to 25% financing is allowable however, it depends upon the investment level of the entire deal. We have seen these instances successful in transactions with a purchase price of $300,000 and up. However, the seller must agree to the owner financing terms which are not always acceptable to business sellers. Domestic Buyers can obtain small business loans (SBA) and therefore can offer all cash to a Seller which is more attractive.
6. There is not bank financing available for foreign and international buyers.
In many cases, the cash that a foreign buyer has available is the cash that they have. Unless it is a piece of property that can collateralize the whole purchase price, business financing for foreign business buyers is nonexistent either from an American bank or a foreign bank. You may encounter business buyers from other countries like Canada claiming their banks will finance a business purchase, but how would that even work? Most American banks will not finance business purchases so claiming a foreign bank without the benefit of American laws backing them is unlikely. Financing businesses is not the same as financing real estate where a bank would have immediate collateral to take in the event of a default, most banks require SBA backing to finance a business purchase and these benefits are not available to foreign investors.
7. Many Business Brokers will claim that they deal with a lot of foreign buyers, but you really want a business broker that markets to all business buyers both foreign and domestic. You never know which type of Buyer will offer you a better deal, so why limit yourself to just one buyer segment?
This is especially important when it comes to selling larger businesses in Orlando because American domestic buyers are the ones buying larger businesses here. A foreign buyer interested in a $2 Million business would need to come in with almost all cash. While these buyers do exist, how many of those buyer do you think are out there hanging around? There are many more American domestic buyers available because often they can obtain bank financing with as little as 20 percent down. This expands the pool of potential buyers for the business seller. As a Seller, you want your pool of business buyers to be as large as possible.
8. Foreign and international buyers might only be looking to buy the bare minimum business purchase to qualify for an investor’s visa.
This is more of a recent phenomenon within the last decade. While we have plenty of foreign and international business buyers in Orlando, many are looking for smaller businesses just large enough to qualify for a visa. This means that if you have a large business, one valued at $500,000 or more you might be looking at more domestic buyers, corporate and equity buyers.
9. Location matters to many foreign and international business buyers in Orlando.
This does not mean that if you’re selling a business in a rural portion of Orlando or Central Florida that a foreign buyer will not purchase it, it just means that you might have to work much harder to market the business to this segment of buyers. Many of the foreign and international business buyers in Orlando are easily exposed to the Disney and other tourist friendly areas that have a lot of vacation homes and large international populations. They have not thought to look for businesses for sale in Lake Mary, Oviedo, Winter Park, Winter Garden, Maitland, Altamonte Springs, Ocoee, Sanford, and many more. However, once these areas are pointed out to them, many might choose to live in other parts of Orlando and Central Florida depending on the business they find. These areas have to be brought to their attention though and many foreign buyers will purchase homes first without thinking about where the business they purchase will be located. If your business broker only markets to foreign buyers, the location of your business could be an issue. However if you have a great business and a great business broker that markets to all buyers you can sell your business in Orlando to most business buyers foreign or domestic for a good price.
10. Foreign and International buyers do not overpay for businesses for sale in Orlando.
The notion that buyers from another country will pay obscene amounts of money for a business that does not warrant that value seems to be the biggest myth and rumor that business brokers in Orlando will encounter when selling businesses. That being said, there are brokers that use this rumor all the time to get listings. The reality is that foreign buyers might pay a premium for a business, they might pay all cash and they might be slightly easier to close a sale with if a buyer has a limited time to search for businesses while in the country. However, it is important not to exaggerate these scenarios because foreign buyers still will not grossly overpay for businesses and the amount of foreign business buyers that actually follow through with a business purchase is small so you’re better off marketing your business to all types of potential business buyers. Remember that just because business buyers are from another country does not mean they do not have access to information. These buyers have the Internet, they can do research and many own businesses in their home countries and they are not easily fooled. So, if you want to sell a business in Orlando to a foreign or international buyer the selling price still needs to be reasonable enough to the degree that it would attract an American domestic business buyer. Otherwise the business will not have much appeal to a buyer from out of the country either.
There are always lots of different options when one is looking to sell their business in Orlando. If you’re curious and wondering, how can I sell my business in Orlando or Central Florida ….. call us at 407-478-4101.