If you’re a prospective buyer who is short on cash or a seller who wants to sell his company quickly, you might consider seller financing.
With seller financing, the seller defers a portion of the purchase price. The buyer pays a portion of the purchase price at closing and pay the remainder over a period of years at a market interest rate. Structures for seller financing are as varied as structures for residential mortgages. The seller typically wants payment completed within one to five years and a security interest in the assets of the company. The seller’s willingness to be flexible in financing terms is directly proportional to the seller’s eagerness to sell the company.
From the buyer’s perspective, the seller financing arrangement should be independent from other aspects of the deal. For example, sellers often hang around as consultants to the company. Sometimes, those arrangements do not work out. If the consulting arrangement with the seller goes sour, there should be no ripple effect that negatively impacts the financing deal between the seller and buyer.
Comments