Buying an existing Oxford, MS restaurant, boutique or practice can be paid with three pieces: the buyer's own cash, a note the seller agrees to carry, and a term loan from a funding partner for the rest, plus working capital for the first months under new ownership. Hillfield Financial sends the purchase to funding partners, who review it and decide.
An article from Hillfield Financial in Oxford, Mississippi on financing the purchase of an existing business, with an invented purchase worked through in code and Lafayette County Census counts.
Seller notes and down payments in an Oxford, MS business sale
A business sale does not have to be paid in one check. The buyer brings a share in cash, which shows a partner that the buyer has something at stake. The seller may agree to take part of the price later, as a note paid monthly out of the business, which shows that the seller believes the business can carry it. A funding partner's term loan covers the rest. How large each piece is depends on the partner, the price and the business's record, and partners sometimes ask that the seller note wait behind their loan.
| Piece | Amount | Share of the price | Monthly |
|---|---|---|---|
| Buyer's cash | $36,000 | 10.0% | None |
| Seller-carried note (annual rate 6%, five years) | $54,000 | 15.0% | $1,044 |
| Partner term loan (annual rate 10.5%, ten years) | $270,000 | 75.0% | $3,643 |
| Total | $360,000 | 100.0% | $4,687 |
In this invented case the business has to produce $4,687 a month for the two notes before the new owner takes any pay. The seller's note ends after five years, so the payment falls to $3,643 for the remaining five. A buyer can test the price by setting that combined payment against the seller's deposits for the past year.
Valuing equipment, leases and customer lists
The price of an established business is made of things a partner can value and things it cannot. Kitchen equipment, display fixtures, dental chairs and inventory have a resale value, and a partner can lend against them. The lease, the staff, the customer list, the patient records and the name on the door make up goodwill: real value to the buyer, but nothing a partner can sell if the business fails.
Illustration only, invented figures: if the $360,000 purchase above includes equipment appraised at $85,000 and $40,000 of stock, the remaining $235,000, or 65.3% of the price, is goodwill. A partner funding that share relies on the business's cash flow rather than on what it could recover, which is why the seller's statements carry so much weight in an acquisition request.
Leases deserve their own look. A restaurant bought with two years left on its lease, and no written option to renew, is worth less than the same restaurant with ten. Lafayette County, MS counted 150 restaurants and other eating places with paid staff in 2023, averaging about 26.8 employees each by our arithmetic (CBP, NAICS 7225); a buyer of one of them takes on that crew along with the lease, so the restaurants page is worth reading before an offer.
Working capital for the first months of new ownership
The first weeks under a new owner bring costs the seller's books never showed: new insurance, deposits for utilities in the buyer's name, a changed card processor, new signage, sometimes a few weeks in which regulars test the new management. Payroll keeps its own schedule through all of it.
Illustration only, invented figures: a buyer who wants 45 days of cushion for a staff paid every two weeks, at $11,500 a payroll, will meet 3 or 4 paydays inside that window, depending on where the first payday falls, or $34,500 to $46,000. Asking for that cushion in the same request as the purchase, as working capital, is clearer to a partner than running short in the second month and asking again.
Who else reviews the purchase agreement
A funding partner is one of several readers of a purchase agreement, and it is not the one who protects the buyer. An attorney reviews the terms, the representations the seller makes and what happens if they prove untrue. An accountant reviews the seller's books, the tax treatment of the price and whether the earnings hold up. The landlord has to consent to assigning the lease. A franchisor, where there is one, approves the transfer.
Both kinds of adviser have a presence in the county: Lafayette County, MS counted 64 legal services establishments with paid staff in 2023 (CBP, NAICS 5411) and 11 accounting, tax preparation, bookkeeping and payroll services firms (NAICS 5412). Hillfield Financial reviews none of these documents. It sends the purchase, the seller's records and the buyer's plan to funding partners, who make their own decision; the request form is the starting point.
By Hillfield Financial · Updated
