Legal Term
Small Business Buy-Sell Agreement Funding Terms
Legal Definition
The comprehensive analysis of the financial provisions within a buy-sell agreement, a contractual framework governing the transfer of ownership in a small business, with emphasis on the structure, timing, and security of purchase price payments, including cash, seller financing, earn-outs, and related obligations.
In Plain English
Figuring out how the money works in a contract that sets the rules for selling a small business, like what's paid upfront, over time, and what happens if payments are missed.
Example in a Contract
Section 5. Purchase Price and Payment: The total Purchase Price of $600,000 shall be paid by Buyer to Seller as follows: (a) $150,000 in certified funds at Closing; (b) $450,000 evidenced by a secured promissory note (the 'Note') with a fixed interest rate of 4.5% per annum, amortized over 60 months with monthly payments, and secured by a UCC-1 financing statement filing against all Business assets; and (c) a contingent earn-out payment of up to $50,000, payable within 30 days after the second anniversary of Closing, based on the Business achieving specified revenue targets as set forth in Exhibit B.
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