The current financial "crisis" has made 3rd party financing more difficult.

Even though most Sellers want all cash, 90% of all sales will be financed by the Seller!

Keeps seller honest and buyer vested!

 

Buyers:

• DownPayment on a business is always equal to Discretionary Earnings. The balance must be financed by someone.
• Do you have the downpayment cash but no way to finance the rest? Is the SBA not guaranteeing a loan?
• Seller financing might be an option.
• Seller's help finance the sale of the business by taking back a second note on the business,  extending credit to the buyer against the purchase price of the business.
• Lower interest rates than banks
• Faster acceptance time...no bank to deal with

 

Sellers:

• Good return on money and monthly income
• Protected with monthly P&L, balance sheetsm requiring a minimum level of inventory in the Security Agreement, etc.
• Seller retains some control without a bank involved.
• Reduces tax burden at time of sale/transfer of ownership

 

The most common option for seller financing involves secured notes, but other options , including unsecured notes, assumption of the seller’s guaranteed credit, assumption of capital leases, a real estate lease, earnouts, notes on capital equipment and more, exist. 

 

The seller will hold a note at an agreed upon interest rate for a specific term or amortization, generally ranging from two to 5 years for smaller sales.  The terms of the sale may include a balloon payment three to five years after the purchase  date. This allows you, the buyer, some time to get up and running and establish a successful track record with the business.  At this time, sometimes other forms of financing, such as SBA loans, could become available.  

 

At GBA, we educate the sellers ahead of time, letting them know that there is a very good chance they will need to finance at least a portion of the deal. We help the seller come up with amenable terms that they would be willing to accept from a buyer.  Your intermediary will put together an offer for you that can include the seller financing request, typically with the pre-approved terms from the seller.  These terms are negotiable, and different terms can be included with the offer.