Seller Financing

Seller Financing

One of the simplest - and best - ways to finance the acquisition of a business is to work hand-in-hand with the seller.

The seller's willingness to participate will be influenced by his or her own requirements: tax considerations as well as cash needs.

In some instances, sellers are virtually forced to finance the sale of their own business in order to attract a buyer or to keep a deal from falling through. Some sellers, however, actively prefer to do the financing themselves. Doing so not only can increase the chances for a successful sale, but can also be helpful in obtaining the best possible price.

The terms offered by sellers are usually more flexible and more agreeable to the buyer than those offered from a third-party lender. Sellers will typically finance 25 to 50 percent of the selling price, with a competitive interest rate. The terms will usually have scheduled payments similar to conventional loans.

As with buyer-equity financing, seller financing can make the business more attractive and viable to other lenders. In fact, sometimes outside lenders will refuse to participate unless a small percentage of seller financing is already in place.

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