Financing Options

Financing the purchase of a business has a direct impact on the actual selling price and the time it takes for the asset to be sold.  Once the value of your business is established, that becomes the target price for a sale.  Business owners that want buyers that can obtain bank financing on their credit strength and economic lending criteria for the full price tend to push the time of a sale out and may have to take less than the established value.  Business owners that will finance all or a portion of the sale price maintain strong control over the closing price and the time of sale.  So, if your anticipating selling a business determine your expectations of how you expect a buyer to finance.

Seller financing has advantages and disadvantages.  The disadvantage is you are still tied to the business financially and run the risk of a buyer defaulting.  If that happens you regain the business operating interests and unwanted litigation.   The risk of default can be minimized to some degree by how well potential buyers are screened and qualified before you consider them.

The advantage of seller financing is you have a steady income over time to do as you wish.  In fact, the note is an asset that can be used to obtain advance cash flow should the need arise prior to the note being paid off by the buyer.  Structuring the note at closing to be salable is important.

Have questions about financing the sale of your business?     Email Bob,  bob@vrhi.com.