Seller Financing
 |
 |
Question:
I am looking at buying a business where the seller is offering 30% owner financing. How is this typically structured? What are the standard variables and negotiating points?
Answer:
While seller financing is something you always want in a deal, I would suggest that you shoot for at least 40%. Although deals vary, the note should generally be for five years, at around 6% - 8% with the ability to prepay at any time. I would also recommend:
- Starting the payments 60-90 days after closing with no interest penalty for this period
- Have the ability to pay down the principal sums at least twice per year.
- The loan is to be secured by the assets of the business and no personal collateral (i.e. your house). While you will have to sign personally, do not pledge any personal assets. After all, if the business is as good as the seller has most likely represented it to be, then he/she should have no problem securing his note against these assets.
As a side bar, if the business proceeds well in the future and you can afford it, approach the seller and offer to pay off the note immediately for a sizeable discount (at least 20%).
Download expert tips, and proven strategies covering the entire buying process. Learn how find and buy the right business and negotiate a great price. Click here.
Download a 200-Point Due Diligence Checklist & Strategy Guide. Learn everything about any business before you buy. Click here
| Get more expert advice in Richard Parker's How To Buy A Good Business At A
Great Price - the most widely used reference
resource and strategy guide for buying a business. "I highly recommend this course to anyone even thinking about buying a business." - Dylan Garland President, BizQuest |
|
|
|
Richard Parker author of: How To Buy A Good Business At A Great Price(TM), the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center. Richard Parker is also the author of BizQuest's Business for Sale Blog |