If you own a business then you probably know that it can be hard to get a traditional lending institution like a bank to finance you. Small businesses are inherently risky, and as such banks are typically unwilling to help out.

If you’re trying to sell your business, you have to remember that most buyers aren’t coming to the table with an all-cash, upfront offer. All-cash buyers are very rare, so a business owner who is unwilling to work with someone who doesn’t have all-cash is going to severely limit their pool of prospective buyers.

To make your business available to a larger pool of people you can skip the traditional banks and offer seller financing. Why?

Seller financing solves a couple of problems.

First, your willingness to keep some skin in the game after a sale speaks volumes about your faith in the future of your business (even under new leadership). You are showing potential buyers that you know the business is solid and that it has the potential to make money going forward (otherwise you don’t get paid). This can really help reassure buyers who are going to be handing you a lot of money that you see the value in the future of the business.

Second, it does away with the extra complexity of a third-party loan in your deal. When it’s just you, your broker and your buyer working out a deal you don’t have to worry about extra timelines, paperwork and bureaucracy that comes with a more traditional loan – streamlining the process.

Third, your agreement isn’t contingent on current interest rates. Or on the whims of the market. A seller financing agreement is only between two parties, so it can look however those two parties want and is insulated from the market at large.

More good news? If the buyer defaults, you get your business back so your risk in a seller financing situation is relatively low.

The point here is although it would be nice to get an all-cash, full price offer on day one – reality is more likely. Offering seller financing opens your pool of buyers, keeps banks and market whims out of your deal and helps you show buyers you’re confident in the future. Ask your business broker about what a seller financed deal might look like for you.

Do you have more questions about how seller financing works? Would you like to know what a seller financed deal might look like for your business? Ask us! Leave us any questions or comments and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com