The U.S. economy appears to be slowly emerging from recession. Business owners need to recognize that the capital that they generally have required for running and growing their businesses is equally important to their exit plans. As a result, when credit is tight, the ability to finance an exit becomes yet another challenge to an owner's exit. The good news to this problem is that necessity is the mother of invention and a few creative strategies can be employed to make adjustments for your exit.

First, you need to realize that you are not likely to get all of the proceeds for your exit at the time of your departure. Whether you are selling to an outsider or a private equity group, or you are conducting an internal transfer such as an employee stock ownership plan (ESOP) or a management (or co-owner) buyout, you are - under normal circumstances - not likely to get 100% of your transfer proceeds at the closing.

Now, as consumers of large ticket items - take for example real estate - we generally do not write a check for the purchase out of our savings accounts.

Instead, we go to the sources of capital that would normally finance those transactions - in this case, the banks. The bank wants to know three things when they loan money:

•  First: the use of the proceeds
•  Second: how the funds will be repaid
• Third: a back-up plan (collateral) for the repayment of the loan

Even in 'normal' times it can be an uphill battle to illustrate that an investment in a privately held business will have the capacity to repay the loan. In today's environment, the challenge is even greater.

So, what is an exiting owner to do in order to achieve the financially rewarding exit that they are looking for?

Be the Bank

Owners should know that they have the ability to 'be the bank.' Owner financing is more prevalent in internal transactions and in smaller transactions (less than a few million dollars) where the buyer (or successor) generally does not have the ability to borrow enough money to purchase the business.

If the buyer or successor cannot achieve bank financing, it is helpful to know that you, the exiting owner, can benefit by 'being the bank.' After all, you know the answer to all of the three lending questions: