Landlords and selling your business – risk assessments

General Category on January 14th, 2014 Comments Off

You have decided to sell your business and found a potential buyer but there is one large hurdle you need to get over – obtain the landlords approval for your buyer.

Many business owners forget your landlord is in the business of collecting rent on their investment with the least amount of risk and effort as possible.  So any buyers you put forward will have a risk assessment conducted on them.

Examples of the risk assessment will be as follows:

  • Vendors rental payment history to date – if payments have been late or had trouble paying, is the business viable to continue to pay rent under a new owner.
  • Assets and liabilities of new owner – after they purchase of the business and payment of the bond, how liquid is the buyer.  A new owner needs to be able to weather trouble times and pay their rent no matter what.
  • Experience of operator – have they run a business before, experience in the industry, vendor involvement in the business going forward (hand over period).
  • Fit outs – if the business requires a fit out in the near term, can the new buyer meet this cost?
  • Background on new owner – has this buyer had financial troubles in the past, not paid rent, owns other businesses not travelling well etc

As you can understand the landlord reports to a bank manager like you and wants to ensure repayments are on time, the payments continue to be received and the property is looked after.

So you need to keep in mind that even though you have found a buyer for your business, put yourself in the landlord’s shoes to see if you would approve this person if the property was your own.  Before talking with your landlord it is best to understand the points above first about your buyer so you can address any concerns the landlord may have.

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