Seller Financing Helps Get Your Business Sold
Buyers love seller financing – where the seller defers part of the price. Of course they do! But for a canny seller, offering a small element of seller financing can often make a big difference in both the number of potential buyers they attract and in the price they achieve.
The below article is written from a buyer’s perspective, but one takeaway is that for the buyer to qualify for an SBA loan, the transaction needs to be at least 10% financed by the seller. A seller willing to defer as little as 10% of the asking price opens up the opportunity to numerous buyers who wouldn’t have otherwise been interested, buyers who need the support of SBA or some other third party to finance the acquisition.
And the seller could potentially raise their price expectations by a lot more than 10%!
Advertising and publishing veteran Janelle Regotti was looking for a business to buy. The right opportunity presented itself in 2014 when she found Guide Publishing, a company that distributed a quarterly resource guide for Northeast Ohio seniors. The only catch: Regotti didn’t have the $500,000 asking price.
With few physical assets to borrow against, she was unlikely to get a bank loan. So with the help of her business broker, she negotiated a seller-financing deal and bought the business five months later with just 10 percent down and quarterly payments due over 10 years at about 6 percent interest.
Of course, most sellers won’t finance 90 percent of their asking price. But borrowing 10, 20 or even 30 percent from a seller at a competitive rate still beats using your credit card to cover capital shortfalls. If you’re interested in … Buying A Business Through Seller Financing.