Oct 09
15
Seller Financing
As you continue your search for a business that suits your needs, one of the key phrases you may hear is “seller financing”. Your broker can help you to understand more about how seller financing works, and why or why not a particular business will offer it.
What is seller financing?
Often sellers of small businesses will finance a portion of the transaction, effectively acting as a bank. The Sellers are looking for the same securities as a bank, but because of their intimate knowledge of the business, they are more likely to lend to a qualified buyer.
Especially in business transactions under $5 million, seller financing is becoming more and more common.
What does this mean for my purchase?
When a seller decides to offer seller financing as part of a business transaction, it can be for several reasons.
- A seller may provide seller financing to appeal to a wider range of buyers. One reason a buyer may look for seller financing is that their net worth is too high for a bank to finance the full amount of the purchase price. Although the net worth would allow for a cash purchase, not all buyers choose to take this route.
- Lack of availability of third part financing can affect the amount of seller financing offered. In these economic times, many buyers understand the potential challenges of finding the right lender.
- Some sellers may offer some seller financing to show their faith in the future of the business. Many buyers see seller financing as an investment in the success of the business. While a buyer is paying off the promissory note, the business’ success may directly impact the seller. Seller financing can often read as belief that what they built is strong enough to thrive.
To learn more about Seller Financing, and how it could impact you, contact your Sunbelt Business Broker today.
Other Resources: BizBuySell: Seller Financing Basics Sunbelt Network: Financingwww.sunbeltmidwest.com/search.aspx
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