ADVANTAGES
- Some Sellers are very motivated to sell – Due to the economic challenges that many sellers face they are motivated to sell quickly. Many sellers are on the brink of going out of business and they would be willing to get cents on the dollar rather than get nothing and end up owing creditors thousands of dollars.
- Seller financing is available – Prior to the downturn in the economy it was rare that sellers were willing to carry back some of the financing on a transaction. Today it is fairly common for sellers to provide some financing.
- Landlords are more flexible – In many cases, especially where their tenants have gone out of business, landlords are receptive to giving better terms and conditions to new tenants to keep their space leased. We are seeing many situations where landlords are lowering rents for both new tenants and existing tenants to help keep the tenant in business.
- Strong cash flow businesses are in high demand – More so than ever these type of businesses are in high demand as the risk factor for the buyer is greatly diminished. Many sellers that have strong cash flow businesses don’t want to sell today unless they have to as they realize that it will be hard to replace their cash flow in today’s environment.
DISADVANTAGES
- Deals take longer to close- This is a result of the staff cutbacks that are happening as a result of the fiscal crisis the state is experiencing. Many state departments such as the Department of Alcohol Beverage Control (ABC), the Franchise Tax Board (FTB), and State Board of Equalization (SBE) have imposed four day work weeks. Consequently it takes longer to transfer licenses and get tax clearances from the various taxing agencies.
- Vulnerability for state audits – The State Board of Equalization (SBE) and Franchise Tax Board (FTB) are more aggressively auditing businesses in escrow in an effort to raise more tax revenue which delays the close of escrow.
- Buyers are slow to come forward in many cases – Buyers are more cautious today and move slower in making deals.
- More difficult to raise money- For many buyers it is more difficult to raise money as equity lines on homes are non existent and cash is tight. Investors have more stringent criteria for getting involved in deals.
Restaurant Realty has had extensive experience in dealing with the situations indicated above and as a result of our extensive deal making history we know how to capitalize on both the positives and negatives to help close deals in the best interests of both buyers and sellers.
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