Seller financing, sometimes referred to as owner financing, is common in the small business market.
It is a great option for all parties involved.
The absence of extra costs and fees make it a better deal than traditional lending for business buyers. When using traditional lending, like a bank loan, there are higher costs. Banks tack on origination fees, document fees and fees for credit checks.
Also, you will likely get a more favorable interest rate than you would from traditional lending institutions when borrowing from a business seller. You also avoid any penalties for paying off your loan early, like you might encounter from a bank. Most sellers are happy to get their money back faster than expected.
By offering seller financing, a business seller is making their business very appealing to buyers. When you offer to keep some skin in the game, you are telling potential buyers that you have faith in the long term success of the business. If you didn’t, you wouldn’t get paid. It also tells buyers that you are ready and willing to help properly train them and help ensure their own success.
Owner financing also brings in more prospective buyers when you list your business for sale. Although they exist, all-cash buyers are typically few and far between, and traditional financing can be very hard to get for the purchase of a small business. By offering to finance part of the purchase price, you are opening your business to a greater pool of potential buyers, thereby increasing the likelihood that your business will sell.
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