Confidentiality Agreement Helps Protect Business Assets in a Sales Transaction

Confidentiality and why it’s important to Buyers!

Often, when you ask for more information about a business listing that you found on a website or via a search engine, you will be asked to fill out and sign a Confidentiality Agreement also referred to as Non-Disclosure Agreement.

This is done for a variety of reasons to protect the seller’s business interests and ultimately your business interests if you decide to purchase the business in question.

Unlike commercial real estate and other things, the identity, location and other factors about a business are highly confidential. Business owners do not want their employees, competitors, creditors, and customers to know that they are looking for a new owner to carry on their legacy.

You might also be asked about your financial situation and what types of businesses you are interested in.  This isn’t to pry into your personal business but rather designed to tell the business owner you are serious about the business, you have the means to purchase the business and you have the skills required to run the business successfully.

Some Forms You May be Required to Fill Out 

Confidentiality Agreement (CA) / Nondisclosure Agreement (NDA)

Most every listing will require you to complete an NDA. If you have a partner who will also be looking at the information and/or business, he or she will also need to sign a Nondisclosure Agreement as well.

Buyer Info Sheet – also known as a Buyer’s Worksheet

Some clients insist on confirming that any prospective Buyer / Investor has funds necessary to purchase the business and will allow sharing the business name and information only after you have completed and shared your Buyer Info Sheet.

Other important considerations

Records

Although you will receive private information, often documents like tax returns and leases are only shared with Buyers / Investors as part of Due Diligence after an offer is accepted. Make sure when you make an offer that you have ability to get back any down payment and get out of any obligation to purchase the business should it fail to satisfy the Due Diligence requirements.

Note

Some Business Owners do not always keep detailed records. Some listings will say Owner To Prove or Owner Estimate. Carefully assess the records you receive.

Ultimately, you need to know that by filling out a Confidentiality Agreement/Non-Disclosure Agreement and completing a Buyer’s Worksheet you are telling a business owner that you are serious about your interest in their business, that you won’t disclose important confidential business information to employees, competitors, customers, creditors or anyone else associated with the business and it helps business brokers find the right business for you!

To view and fill out our forms – use this link – https://buybizusa.wpengine.com/businesses-for-sale/non-disclosure-agreement/