When Selling a Business

  • Additional purchase price : is an addition to the original purchase price. Often, however, it is usually an offer with a purchase price that is partly conditional. However, for reasons that we will get into shortly, it should be seen as just an addition. If you were not satisfied with what you get as cash on closing, then you should decline the deal.
  • Seller reverse : is a loan that the seller gives to the buyer. That in itself doesn’t have to be anything wrong, but it’s all about the conditions. It makes a big difference if only the company in question is used as collateral, or if the buyer personally guarantees the debt, combined with the buyer owning a property and/or other companies.
  • Earn out : is a definition that can overlap both additional purchase price and sales charge back. An earn out is linked to a performance defined in advance, often turnover or profit. It is easier to justify linking an earn out to profit, but it is safer to link it to turnover.
  • Shifted payment : is a definition where you usually use the expression instead, which is deferred payment. In practice, it is synonymous with sales charge.
  • All these terms : are used by many synonymously with each other, which of course can be argued to be a bit careless. What really matters, however, are the conditions for the future payment, as well as the creditworthiness of the counter party.

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