No tax info is NOT sufficient.
Talk to both your accountant and lawyer
I have a potential buyer but her has yet to make a formal offer. He wants to pay part of the sale amount via a business loan and is asking me for all kinds of financial records concerning my business. We have put a call into our accountant but I wanted to see what information I could get via the web. I am not comfortable giving my information out especially when no formal offer has been made.
Selling a business is a complex set of financial decisions that, when wrong, can cause failure that may not be seen for months. Strongly suggest that if you don't have experience here, you should seek counsel from brokers, accountants, lawyers. Unfortunately, it is hard for someone who doesn't have experience to know:
- when they need help
- who to get the help from.
It is also an emotional rollercoaster - they want tax records - you don't want to give them - and the closer you get to closing, the more emotional it will be. That is why middlemen are able to keep things on track that would normally fall apart.
It isn't unreasonable to ask for tax records, but the records themselves should be part of due dilligence - AFTER a formal offer is on the table. But they have to have numbers to feel comfortable with an offer. But if you and they are brokering it without a middleman - sometimes those things become roadblocks.
It is ALL a negotiation. Do you run them away because you don't feel comfortable? Can you give them numbers to hohld them until after a formal offer? If you aren't going to use a broker, you need to negotiate like one. There are VERY few set rules - very few things that won't KILL the deal - balancing act. Hope you have a good sense of balance...
- when they need help
If you're selling a business then the potential buyer is going to want to see the business's books including a financial statement that shows the assets and liabilities. The potential buyer is going to need to know the book value of the business and any good will, for years of business, that may be attributed to the company.
If you are selling your business you probably need to get the help of a business broker who can properly package the business and coordinate the deal for you.
Best of luck,
I'm not sure from your statement if it's the bank or the buyer that you are uncomforatble giving your information to.
I can't see any harm in providing the info to the bank - although they don't tend to lend a lot of money to idividuals to buy a business.
As far as providing information to the buyer, I don't see how you can sell the biz without doing that. For every prospect you should have them sign a Non Disclosure Agreement up front before any sensitive information is shared - but at some point it will have to be shared. How can they make an offer without seeing exactly how the business is performing.
If you are hesitant to share information with this particular buyer because you have doubts about them - well that's serious red flag.
Sellers tend to work with iffy prospects for only one reason - they are the only prospect the seller has. I would keep looking for more potential buyers up until the time I get an acceptable Letter of Intent from a qualified buyer. The more prospects you find, the less dependent you are on one buyer or one bank loan officer.
I write in great detail about this questions at my selling a buisness blog