Business for Sale in Texas: How Buyers Find, Finance, and Close

How buying a business in Texas works

Buying an existing company means buying a record. Unlike a startup, the business has customers, staff, equipment, and several years of financial statements you can examine. The purchase price is based on what that record shows the business can earn for a new owner, and your job as a buyer is to confirm the record holds up.

Most small and mid sized companies in Texas change hands privately. The owner engages a broker, the broker prepares a confidential information memorandum and an asking price, and qualified buyers are introduced under a nondisclosure agreement. Price is set by negotiation between buyer and seller and shaped by what a lender will finance. If you want to understand how sellers and brokers arrive at an asking price, our page on how businesses are valued explains the methods. A broker opinion of value is not a certified appraisal, and a lender may order its own.

For an overview of how Forge works with owners and buyers across the state, see our Texas brokerage practice.

The buying process, step by step

The order below is the order most acquisitions follow. Some steps overlap in practice, for example financing work often begins while due diligence is underway.

1. 01

   Define your acquisition criteria

   Write down the industry or industries you will consider, the Texas markets you can operate in, the deal size you can finance, and the role you plan to take after closing. An owner operator buying a field service company needs different things from an investor who wants a manager already in place. Criteria that are written down keep you from spending weeks on businesses you would never close on.

2. 02

   Get prequalified for financing

   Talk to a lender before you talk to sellers. A prequalification conversation tells you what deal size a lender will consider given your liquid capital, credit, and management experience. Sellers and their brokers take a buyer more seriously when that work is done, and it prevents you from negotiating a deal you cannot fund.

3. 03

   Sign a nondisclosure agreement

   Owners selling a business keep the sale quiet to protect employees, customers, and vendor relationships. Before you receive a business name or financial details, you will sign a nondisclosure agreement that limits how you use and share what you learn. Read it. Most restrict contact with employees, customers, landlords, and suppliers without the seller agreeing first.

4. 04

   Review the confidential information memorandum

   The confidential information memorandum, often called the CIM, describes the business: its history, services, customers, staffing, facilities, and summary financials, usually with an adjusted earnings figure that adds back owner compensation and one time expenses. Treat the CIM as the seller presentation it is. Every adjustment should be traced to records during due diligence.

5. 05

   Meet with the owner

   Management meetings, sometimes held at the business after hours, let you ask how the work actually gets done. Ask who holds the key customer relationships, which tasks only the owner performs, what has changed in the last few years, and why the owner is selling. The answers shape your offer and your transition plan.

6. 06

   Submit a letter of intent

   A letter of intent sets out the proposed price, the structure (asset purchase or purchase of the ownership interests), how the price will be paid, the working capital and inventory terms, the length of due diligence, and any period of exclusivity. Most terms in an LOI are nonbinding, but confidentiality and exclusivity provisions often are binding. Your attorney should review it before you sign.

7. 07

   Complete due diligence

   Due diligence is where you confirm what you were told. You and your advisors review the financial, tax, legal, and operating records, test the earnings figure, and look for liabilities that would transfer to you. The scope is covered in more detail below.

8. 08

   Close the financing

   With an accepted LOI, the lender begins formal underwriting. Expect requests for the business tax returns and financial statements, your personal financial statement and tax returns, a resume showing relevant experience, and a business plan or projection. Many lenders also order a third party business valuation for a change of ownership loan.

9. 09

   Negotiate the purchase agreement

   The definitive purchase agreement replaces the LOI. It contains the representations and warranties the seller makes about the business, the indemnification terms if those statements prove wrong, the noncompete, the allocation of the purchase price among the assets, and the conditions that must be met before closing. This is attorney work on both sides.

10. 10

    Close the transaction

    At closing the parties sign the final documents, funds move through escrow or the closing attorney, and ownership passes to you. Leases are assigned or replaced, licenses and permits are transferred or reissued, bank accounts and payroll change hands, and the lender records its security interests.

11. 11

    Run the transition

    Most purchase agreements require the seller to stay on for a defined transition period to introduce you to customers, vendors, and staff. The length and terms are negotiated in the agreement. A written transition plan that lists who you need to meet and which owner tasks you need to learn makes that period count.

Financing the purchase

Most acquisitions are financed with a combination of sources, usually called the capital stack: senior debt from a bank, the buyer's own equity, and often a note from the seller. The mix depends on the deal size, the earnings of the business, the assets it owns, and your experience.

SBA 7(a) loans

The SBA 7(a) program is the most common source of senior debt for small business acquisitions. The SBA does not lend directly. It guarantees part of a loan made by a participating lender, which lets the lender finance deals it might otherwise decline. The maximum 7(a) loan amount is $5 million.

Lenders require the buyer to put equity into the purchase. The SBA sets minimum equity injection requirements, and those rules have changed over time, so confirm the current requirement with your lender rather than relying on a figure you read online. Lenders may ask for more than the minimum based on their own credit policy. SBA loans also generally require personal guarantees from the principal owners of the buying entity.

Underwriting centers on two questions. The first is whether the cash flow of the business, after a reasonable salary for the owner, covers the new debt with room to spare. The second is whether you can run it. Lenders look for management or industry experience that makes the plan credible, and a buyer with no related experience may need a stronger equity position or a longer seller transition.

Seller financing

A seller note means the seller accepts part of the price over time instead of at closing. It reduces the cash needed at closing, and it keeps the seller invested in a smooth handoff. When a seller note sits behind an SBA loan, the lender and SBA rules govern its terms, including whether payments can begin right away and whether any of it can count toward your equity injection. Those rules are specific and have changed, so the lender confirms what applies to your deal.

Conventional loans and other sources

Conventional bank loans are available for buyers with strong collateral and credit, and equipment financing can fund heavy asset purchases. Some deals include an earnout, where part of the price depends on how the business performs after closing. Earnouts can bridge a gap on price, but the measurement terms need careful drafting by your attorney.

What due diligence should cover

Due diligence is the buyer's work, done with the buyer's own advisors. Your CPA tests the financial and tax records. Your attorney reviews contracts, liabilities, and the purchase agreement. Industry specialists, such as an equipment appraiser or an environmental consultant, are added when the business calls for them. The areas below are the core of most reviews.

If due diligence turns up a material difference from what was represented, you have three usual paths: renegotiate the price or terms, add protections to the purchase agreement such as an escrow or a specific indemnity, or walk away within the terms of your LOI.

Texas considerations for buyers

A few state specific items come up on most Texas acquisitions. Your attorney and CPA should confirm how each applies to your deal.

• State tax liability. Texas law can make a purchaser liable for a seller's unpaid state taxes, including sales tax, unless the buyer withholds enough of the purchase price or the seller obtains a certificate from the Texas Comptroller showing the taxes are paid. Ask for it early in the process.
• Sales tax permit. A new owner usually needs its own sales and use tax permit from the Comptroller. Permits do not transfer with the business.
• Occupational and trade licenses. Several trades in Texas are licensed by the Texas Department of Licensing and Regulation, and some licenses are held by an individual. If the license holder is the seller, plan for how the business will be licensed after closing.
• Alcohol and health permits. Restaurants and bars that sell alcohol need permits from the Texas Alcoholic Beverage Commission, and food businesses need local health permits. These generally must be applied for by the new owner, and timing affects the closing date.
• Entity filings. A buying entity is formed with the Texas Secretary of State, and assumed name filings may be needed to keep operating under the existing trade name.

How Forge shares current opportunities

Forge does not post businesses for sale on this site. The owners we work with need their sale kept quiet until a qualified buyer is in the room, because word of a sale can unsettle employees and invite competitors to call their customers.

Here is how it works instead. You submit a buyer profile describing what you want to buy, where, and how you plan to pay for it. We review it and contact you to talk through your criteria and experience. When an opportunity fits, we send a short anonymous summary. If you want to go further, you sign a nondisclosure agreement, and we share the business name, the CIM, and the financial information available at that stage.

A complete profile gets a faster and more useful response. Be specific about the industries you will and will not consider, the Texas markets you can operate in, the cash you have for a down payment, and your plan for financing. Tell us about your management experience, because sellers and lenders will ask.

Submit your buyer profile