Asset Sale: Under this structure, all the assets of a company are sold except for the actual shares of stock or LLC membership units. Such a sale would include the equipment, name and client list of a company. This type of sale significantly reduces the possible liability of a business purchaser but also increases the length of time it takes to close a deal.
 
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Bulk Sale: A sale of goods by a business that represents all or substantially all of its inventory to a single buyer unless such a sale would be common in the ordinary course of its business. In order to protect the purchaser from claims made by creditors of the seller, the seller must usually complete an affidavit outlining its secured and unsecured creditors. The affidavit must usually be filed with a government department, such as a court office. Such procedures are outlined in the bulk sales act of most jurisdictions. If the buyer does not complete the registration process for a bulk sale, creditors of the seller may obtain a declaration that the sale was invalid against the creditors and the creditors may take possession of the goods or obtain judgment for any proceeds the buyer received from a subsequent sale.
 
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Business Intermediary: A person acting between persons, parties, etc.; serving as an intermediate agent in business dealing.
 
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Buyer: A person who buys; purchaser.
 
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Closing Costs: Fees charged to a purchaser by a bank, lawyer, etc. for services related to a sale, such as a title search, appraisal, etc.; any expenses over the purchase price of a house, land, business, etc., that is paid by the purchaser or seller at the completion of the sale.
 
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Commission (Broker): A sum or percentage allowed to agents, sales representatives, brokers, etc., for their services.
 
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Discretionary Cash Flow: The cash flow of the net income of the business after adding back income taxes, interest, depreciation, amortization, one time expenses and the owner’s salary and other fringe benefits.
 
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Down Payment: An initial amount paid at the time of purchase.
 
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Earn out: A contractual provision stating that the seller of a business is to obtain additional future compensation based on the business achieving certain future financial goals.
 
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Earnest Money Deposit: Money given by a buyer to a seller to bind a contract.
 
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Escrow: Money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.
 
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Loan Points: Are an “upfront fee” on a loan that is incurred at the time of the loan. Each point is equal to 1% of the value of the loan. The points are often wrapped into or included in the loan to reduce the borrower’s upfront fees.
 
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Preferred Lender: Is a lending institution that has met the experiential and quality of work requirements of the "Small Business Administration" and is allowed to make lending decisions on behalf of both the lending institution and the SBA. This "short cutting" of the lending process normally saves between 30 to 60 days in closing a deal and keeps the lending costs down.
 
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Seller: A person who sells.
 
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Significant Shareholder: This is an individual or entity that holds a significant portion of an ownership interest in a company. While such interest does not need to be a majority interest, it will be large enough where the shareholder will have a substantial impact upon decisions made for that business. Also called a Significant Member in an LLC.
 
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SBA (Small Business Administration): A federal agency, created in 1953, that grants or guarantees long-term loans to small businesses.
 
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Stock Sale: This type of business sale is one under which the ownership interest in the business entity itself is transferred. While called a stock sale, it can also include LLC membership units or other forms of ownership in a business entity. While these transfers can occur with great speed, they are rarely used as the purchaser is responsible for all of the liabilities of the company including those incurred prior to the purchaser’s taking over the business.
 
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UCC: The Uniform Commercial Code deals with the following subjects under consecutively numbered articles:
  1. General provisions, (including most definitions and rules for interpretation);
  2. Sales, including article 2A, on leases;
  3. Commercial paper, (including negotiable instruments, the validity of endorsements, and the rights of subsequent holders);
  4. Bank deposits;
  5. Letters of credit;
  6. Bulk transfers, (recommended for repeal);
  7. Warehouse receipts;
  8. Investment securities;
  9. Secured transactions (liens and security interests in chattel property).
 
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UCC Filing: This filing is a lien placed upon a business or the assets of a business and registered with the state in which the business is located. Actually finding the UCC filing can be a time consuming but necessary process in the sale of a business and in California it is normally the responsibility of the escrow company. This is often referred to as a UCC 1 filing.
 
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Variable Interest Rate: An interest rate that moves up and down based on the changes of an underlying interest rate.
 
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