How do I protect my sporting goods store’s supplier credit through a sale?
Talk to your key suppliers early, in confidence and with your buyer’s agreement, about how credit terms will carry over. Credit is often tied to you and your history, not the store, so a buyer may need to apply. Settle open balances and plan the changeover together.
Begin by listing every supplier you buy from on terms, with the balance owing, the credit limit and the payment history. Mark the ones the store cannot trade without. Sporting goods stores often depend on a few large brands, and their terms may change when ownership does. Check whether any supplier holds a personal guarantee from you, and ask how it will be released.
Next, decide with your buyer how introductions will happen. A supplier may ask the buyer for financial information and a credit application, and may want a deposit or tighter terms at first. Offer to vouch for the buyer, and be open about timing, since a gap in supply during a busy season would hurt both of you. A supplier who learns of a sale from a rumour tends to react more cautiously than one told directly.
Finally, tidy the accounts. Pay down what you can, resolve disputes and returns, and agree how open orders and seasonal pre-orders will be handled. Your accountant can help you present clean balances, and your lawyer can write the credit and inventory arrangements into the agreement, including any guarantees you gave personally. Ask your buyer to bring a clear picture of their own finances, since suppliers decide based on the new owner, not on your record.
Key takeaways
- List suppliers by balance, credit limit and importance to the store.
- Plan introductions so the buyer can apply before closing.
- Resolve open balances, returns and any personal guarantees you gave.
Related reading
15 pages on the same subject, grouped by topic.
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Buying
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Due diligence
- Expert answerWhat should I ask about a sporting goods store’s out-of-season inventory?
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat are accounts payable?
- 02Business Development Bank of CanadaIndustryHow to sell your business
- 03Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
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