Seller Finance Options Selling A Business
Seller finance to sell a business is generally the least preferred option for a business owner when they are thinking of selling or exiting the ownership of their business. Some owners would sooner take a lower price in cash to take their risk ‘off the table’ than ‘roll the dice’ and hope the buyer of their business is able to service the loan payments. The third option is finding a bank or other third party lender but the current lending environment means many lenders have such high credit requirements that many borrowers are simply unable to qualify.
Whether we like it or not, some things in life don’t change and there is absolutely nothing we can do about it. These include retirement, health issues, family and marriage issues and simply burning out. They also include reasons as simple as ‘it’s time’ as a serial entrepreneur is ready to move to their next venture.
In addition to the above, the economy continues to heal but at a lack luster speed. The slow recovery means unemployment is drifting down, home prices are drifting up but the source of finance a lot of business buyers used historically to get into business which was pulling equity from their house is nowhere near from what it used to be.
If you therefore own a business and it’s time to sell, seller finance is going to be an important part of your selling strategy. For seller finance to work properly for you, you will still need to find the right buyer. If you can find the right buyer, here are 26 seller finance options that may be available to you; depending on your type of business.
- Secured Notes
- Unsecured Notes
- Assume Seller Guaranteed Credit
- Assume Capital Leases
- Earn outs
- Seller Consigns Inventory
- Non-Compete Agreement
- Life Insurance Agreement
- Health Insurance Agreement
- Notes on Capital Equipment
- Additional Training Agreement
- Employment Agreement
- Severance Agreement
- Closing Bonus
- Real Estate Lease
- Family Employment
- Fee for Staying on Lease
- Fee for Guaranteeing Lease
- Common Stock
- Preferred Stock
- Convertible Stock
- Signing Bonus
Some finance options will require more work putting together than others. This additional work means not only being clear between the seller and the buyer but also the right legal agreement so both parties are fully protected. Depending what State the business is located, the seller may wish to file liens to further enhance their ability to get paid.
One of the Golden Rules of selling and buying a business is disclose, disclose, disclose. If the seller enters into seller finance and the buyer finds out a critical issue after the deal closes then having the seller finance instrument cancelled or amended may be an option.
If you have questions about selling your business you are welcome to email me at email@example.com or give me a call on 916 570-2674.