Financing The Purchase of Your Business

Copyright (c) 2009 Irish Taylor

It is a fact that a business doesn't always sure thing to succeed. In some situations, despite of your efforts to save the business, you end up with no other choice but to sell it. Selling the business doesn't mean a failure. Some business owners feel the need to sell it as they have no time or energy or they dislike to continue it.

What is seller financing? Simply put, it is where the business seller offers to finance the business so that the buyer will not need to apply for a financing loan of his own. This helps a seller find more prospective buyers, especially those who do not have the requirements needed to secure a loan from a lender.

As part of the deal, the buyer of the business will only pay the agreed upfront payment, and continue with his payments in installments within the time period that is agreed upon between both of them (the buyer and the seller). The seller will take a lien against the business until the buyer completely pays all his balance in time. As the seller, it will give you the benefit of continuously profiting from your sale with a higher interest.

Naturally, the price of the business will be much higher since higher interest rates will be incurred. However, most buyers prefer this way of selling, because it gives them ample time to make repayments and it also gives them more confidence on the profitability and potential the business. Since the business seller is willing to finance it, then surely it still has a strong potential in the market.

Should You Offer Seller Financing? Given that seller financing has its benefits, it also has its risks. First of all, if the business will not be a success, then you won't be able to claim the full repayment that you originally planned. Yes, there is a lien on the business but it doesn't guarantee that it will be enough to give you the complete price you spent on the business. If business fails, some business sellers ask for additional security and collateral fro their buyer.

If you intend to sell your business, seller financing is an option you can consider but remember that this option may not be the best option for all business owners. It does give you an opportunity to get more from your investment, but it is also accompanied by risks. If you are selling the business due to the fact that you need the cash, then definitely this isn't the way to go. Thus, study your situation carefully before deciding to choose this method of selling.

Carefully check on the buyer's background and reputation if you choose to go on with seller financing,. Remember always ask for an additional collateral to give yourself more security and protection.


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Irish Taylor is a business loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to start up business financing, SBA loans and start up business loans.