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Practice Management > Building Your Business

Show me the money: Funding sources for buy-sell agreements

By Jennifer Vergilii

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Purchasing a successful business is often a solid strategy for growth. Because the business already has a client base and revenue stream, the new acquisitions adds to the top line much sooner than starting a business from scratch. This also allows the purchaser to carefully review the financials and business practices to determine if the business is a fit for their portfolio and is a healthy investment.

However, purchasing a profitable business through a buy-sell agreement requires funding.  At this point, business owners will want details of the funding sources before agreeing to the purchase.  Since the funding arrangements set the stage for the financial success or failure of the long term investment, purchasers should carefully consider all options before selecting the funding source. It is also important for agents and advisors that their clients have a clear understanding of the benefits and risks of each type to help ensure the growth and sustainability of the business.