While sizeable business transactions are rarely done in cash, anymore, it is not completely obsolete. If you’re considering being part of a cash buyout of a transportation business, you need to understand the issues involved. Knowing the pros and cons of cash transactions from both sides of the coin—the buyer’s and the seller’s—can help you decide how to progress, whichever side you’re on.
From a buyer’s perspective, being able to offer cash can mean being able to negotiate lower prices because the seller is dealing with less paperwork and taking fewer risks in the transaction. Even if you have the capability of dealing in cash, it might not be the best option for your situation; paying cash has down sides, too.
While a cash deal provides greater simplicity in the transaction and a lower bottom line payout for the buyer, it doesn’t allow the buyer to as easily gauge the seller’s level of confidence in the company. If, however, the buyer asks the seller about financing options, the seller’s willingness may reveal his or her opinion of the company’s viability. For additional input regarding a business’s worth and projected profit capabilities, a buyer should always review financial documents and research the market projections and transport business valuation figures.
Being flexible and keeping your “cash card” hidden for a time might allow you, as a buyer, to feel out the situation more genuinely than immediately revealing your desire to deal in cash.
Because the cash scenario saddles the buyer with 100% of the risk, buyers should beware of a seller who insists on a cash deal: There’s probably a reason that person is unwilling to take on any of the risk.
Even if a buyer has done the homework and is willing to assume the vulnerability for a business, requesting some form of security may be wise. In any business changeover, the transition period is most critical, often resulting in lost customers. Because of that kind of heightened risk, a cash customer may want to draw up a contract that includes a contingency clause regarding the business’s performance during a specific time frame.
By realizing the potential downfalls of a cash interaction, you can look out for yourself and increase the likelihood of making a secure investment, in the end, no matter how you choose to pay.
On the seller’s end, simplicity is far from the greatest incentive for accepting a cash offer: Nearly nonexistent risk of default makes accepting cash quite attractive. By selling without having to provide financing to a buyer, a motivated seller is able to abandon the business and all of its financial responsibilities, for good.
With caution and flexibility on both sides of the deal, a cash transaction may be the best option for you as a transport business seller or a business buyer.