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Selling biz as stock sale how to handle net of A/R, A/P

Agreed sale price includes net of (cash + A/R) - (A/P + balance on line of credit). How do we handle so buyer retains A/R for cashflow but also takes on our A/P when we have personally guranteed the line of credit and some of the A/P from vendors?

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Answers (1)
Steven St
World Business Partners, Inc
Los Angeles County, CA

Your personal guarantee remains in effect unless you get a release of liability from the creditor. The account may or may not be assumable in any case. Many creditors do not care who owns the company as long as they are being paid. The trouble comes when the payments stop being made or starts to come in later and later.

There are several ways you can structure a stock sale with A/R and A/P included. But the issue of a personal guarantee is between you and the creditor, not the Buyer.

It would be best, if the new Buyer could assume the accounts and give you a release liability from the creditor. The problem with that is you have built up a level of trust with your vendors and creditors that the new Buyer most likely doesn't have and the credit lines they may extend to your Buyer might not be anywhere near what you have now.

If the creditor finds out that you sold the business, they may want to call the loan or get information about the new Buyer. This also may lead to them reducing your businesses credit line and/or available capital. You might be able to add them to your accounts or co-sign for a new account for them but that still leaves you with the personal guarantee.

This is the reason why most Buyers like to keep the Seller's credit accounts open as long as possible and why most Sellers want all A/P to be paid off and closed at closing.

As you can see, this is a very tricky area and full of possible things that can go wrong. Get help from a really good attorney in your area to go over your situation and help you determine what is in your best interest.

Hope this helps.

Apr 27, 2009

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