Need advise re: cash-on-hand (buying business) (small business, purchase, company, money)

[MexicoBusiness]

I've got a basic question, and I'm almost embarrassed to ask...

We're in the process of purchasing a manufacturing business, and my question is: at the point of purchase, is the cash-on-hand that the business currently has in the bank included in the purchase price?

We're paying $2.2M for the business, which currently has approximately $220K in cash-on-hand.

I know, silly question, but wanted to sweep the corners. Hope someone can help...

Thank you!

[The Man in SATX]

That depends on what your agreement is..

My thought process is .. if your purchasing a business that is currently running.. you have the start up cash on hand to continue said operation.. the money that is in the bank.. is what they have earned and they would keep. You should have the funds to continue the business and pay the employees and what not until you go "black" in your books.

[sunsprit]

Your purchase contract should specify the major assets of the company that your are buying.

If the assets include the current cash on hand and receivables, then that money is part of what you've purchased.

[jimmyP]

Generally speaking the cash is part of the business. However, really depends on the contract and if it is a sole proprietorship it may belong to the owner.
I acquired a small business a while back with questionable receivables and discounted them in the purchase but agreed to pay the former owner if collected. It really is part of negotiation.