Are you thinking about buying a Danville business for sale? When buying or selling a business, it’s important to protect yourself with escrow. If you’re a buyer, it’s a major investment that warrants doing some homework on the company as well as its finances. On the other hand, if you’re a seller, you may be worried about whether or not an interested party really has the funds to purchase your company. One of the simplest ways to make sure the contract is honored during the transaction is to hire an escrow company. If you’ve been Googling, “Danville business for sale,” you may be wondering how commercial escrow works.
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The Purpose of Business Escrow
Business escrow accomplishes a number of things when a company is changing hands. To begin with, it’s important to understand that a buyer’s earnest money deposit is verified. The escrow company will deposit the check from the buyer and hold those funds in an account until the transaction is either completed, or cancelled, by both the buyer and the seller. Earnest money helps to ensure the sale won’t fall through, and shows that the buyer is serious.
Overstated Profit
If you’re thinking about buying a Danville small business for sale, it’s possible there may also be times when you discover that the profitability of the business was overstated. The due diligence period is often when this information comes up. If found to be exaggerated, the buyer can then decide that the business is not likely to be profitable, and won’t generate adequate cash flow to make the investment worthwhile. In this case, if the buyer has provided the seller with a cashier’s check, then it may be difficult to cancel the transaction and have the deposit returned. But when an escrow company holds the funds, it’s much simpler to recoup your deposit.
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Buying a Danville Business for Sale
It’s also important for the buyer to learn whether there are any liens against the business, and ensure that the seller pays them. Escrow companies require UCC searches to determine if the seller has any liens or debts against the company. Escrow professionals also publish a notice to creditors, allowing them to file claims against the seller (prior to closing). All of these steps are taken to protect the buyer in the transaction.
Related Content: What are the Potential Pitfalls in a Business Purchase?
Business Escrow
Do you have a Danville business for sale, or are you looking to invest in one? There are many benefits to working with an experienced escrow company. In fact, almost all legitimate business brokers will decline to be involved in transactions where business escrow isn’t used. It’s ideal for everyone to have a third party hold the funds. An escrow company will make sure that everyone is in agreement before the sale is finalized.
For help with your business purchase or sale, contact us at Bay Area Escrow. Our office can be reached at (925) 831-9099, or click the link to fill out a contact form.