When to seek seller financing
Sellers hate it, but buyers are bound to ask themselves, “What is wrong with this business, when the seller will not bet on the future viability or their business and I am? I mean, other sellers are willing to provide seller financing?"
Here are some good reasons why seller financing is important:
- Seller financing increases the chances for a sale.
- The seller will usually get a much higher price.
- The tax advantages are better than an all-cash purchase.
- Seller financing tells the buyer that the seller believes in the future of the business.
- Most banks will require some seller financing i.e. “If you don’t believe in the future of the business (and you know more about it than we will ever know), why should we believe in it”?
Lastly, Sellers will need to protect themselves in the same manner that a bank does when making a loan. Some areas you may want to include would be: Require good financials from all parties, run credit checks, use an attorney, get more than one party to guarantee payment, require quarterly financials, have a balloon payment option, keep title to the equipment, etc.
Feel free to contact me if I can be of assistance.
- Steve Sink
CBI
M&AMI
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