Financing Options

Today, more than ever, it is very important for a business seller to understand the value of offering seller financing.  With lenders (including SBA lenders) tightening their criteria for lending, the offer by a seller to finance a portion of the sale price for a qualified buyer can make the difference between selling or not.

A third party lender like a bank will be looking for the following things in a business to consider making a loan:

• Three years of tax returns
• Appropriate and legal owner “add backs” in earnings
• Last three years showing consistent revenue growth
• At least three years in business
• A buyer willing to put in at least 20% of the sales price
• And it is always a plus if the seller is willing to finance a portion of the sales price; many banks insist on at least a 10% seller’s note

Although the terms of seller financing are negotiable, it is safe to assume that most buyers expect sellers of offer at least a minimal amount of financing.   A willingness on the part of the seller and the buyer to find a financed amount that gives the seller cash in pocket, and enables the buyer to handle the monthly payment often results in a successful sale.