I’m here to share a fascinating anecdote from the world of small business transactions. Watch the full video here:
Picture this: a retail store is up for sale, with an asking price of $150,000. After negotiations, the buyer and seller settle on a price of $130,000.
Now, here's where it gets interesting. The terms of the deal stipulated that $100,000 would be paid on closing day, with the remaining $30,000 plus interest to be paid over the course of a couple of years through vendor financing.
But here's the twist: on closing day, the seller had about $55,000 in payables. So, what did the buyer do? He asked the seller to hold off on paying her suppliers and bring all the payables to the closing day.
A few hours before the appointment to finalize the deal, the buyer and seller sat down together. Armed with his credit card, the buyer proceeded to call all of the seller's suppliers and paid off the $55,000 worth of bills.
As a result, when the transaction actually occurred, the buyer only had to pay the remaining balance of about $45,000. Essentially, he had put $55,000 of the business purchase onto his credit card.
From the seller's perspective, it was an asset transaction, so she kept the cash in the bank along with the receivables and payables. The buyer's credit card maneuver had zero effect on her.
But for the buyer? Well, he shared with me that he racked up enough airline points for a business class flight to California. Talk about turning a business deal into a rewarding travel experience!
Cheers!
David C Barnett
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