Small business owners in rural America often have a problem when they want to retire. Many owners hope to sell their business in order to retire however the reality is often very different because of difficulties in financing a buyout. Even though the business has been profitable as a result of dedication and long hours, the hard assets may not be enough to cover the financing of the buyout. The owners could have earned a living for many years, yet still have not been able to set aside enough to allow them the ability to carry the note for a buyout.
At the same time there are young people in rural areas looking for opportunities and they frequently move to an urban area for a job. A logical choice for business succession in these instances is to sell the business to local entrepreneurs or the employees. Financing still remains a problem so new solutions need to be found especially since rural towns do not have large economic development budgets and many times do not have someone responsible for economic development on a full time basis.
One idea is to use gap financing with a combination of government backed lending and private equity to fund the buyout of the business with one important component. The additional component is a mentor group consisting of a mix of experienced professionals and university students to provide some advising for the local entrepreneur or employees (if they purchase the business). The mentor group should include members with industry specific experience as well as some members not in the immediate region. The experienced members can provide financial and marketing advice as well as a new network for the business. The university students can get practical experience and provide new ideas plus offer insights into the use of the latest technology.