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Blog Posts & Articles  >  Seller Financing Small Business Transactions Becoming Common Practice




Seller Financing Small Business Transactions Becoming Common Practice

Seller Financing Small Business

Most any seller financing small business offerings are more desirable than companies on the market by owners who want to be cashed out. It often is the seller’s willingness to help fund that enables the buyer to make the deal work financially. Among the reasons for this are:

1. Borrowing money from most lenders to buy a business can be difficult and expensive. It only is recently that banks in the SBA lender network have started to loosen the purse strings for applicants seeking approval for the agency’s 7(a) and 504 lending programs. And while interest rates offered by most lenders are low by historical standards, they aren’t as attractive as rates that might be requested by a seller who is motivated to complete a deal.

2. An application to an institutional lender to help fund a deal that already includes seller financing is more likely to be approved. Most business banks, including those in the SBA lending network, consider it a positive feature of any loan application when there are other lenders involved, particularly if another lender is the seller--the one person who knows the most about the business and its likely chances of success in the future.

3. Also reassured is the buyer when encountering seller financing small business opportunities for sale. The 20% to 33% average of the purchase price that sellers now are willing to carry back with a note, is a big chunk of the total that the buyer will need to raise in order to complete the purchase of a small or mid-sized business.

4. When a seller has agreed to provide financing to facilitate the purchase of a business, it is considered that he or she has “skin in the game.” That means any problems with the company under management by the new owner will jeopardize not only the buyer’s investment but also the amount the seller is counting on to be paid. And with money at risk, the seller usually will do whatever he or she can to help the buyer correct any problems that could impact the success of the company.

Some business purchasers are interested in all cash deals in order to buy enterprises at a hefty discount. But buyers who look for seller financing small business opportunities when examining companies for sale, improve the chances of getting a business with a solid future and a deal more likely to be aided by an institutional lender.

About The Author: For over 25 years Peter Siegel, MBA has provided niche business purchase financial advisory and loan broker services with SBA Loans, Non-SBA Loans, Retirement Plan Conversions, Hard Money, Gap/Bridge Financing, Note Restructures, etc. He assists with financing for: Business Purchases, Business With Real Estate Purchases, Franchise Resale Purchases, New Franchise Purchases, Pay Off Existing Seller Notes, Partner Buyouts, Employee Buyouts. Peter Siegel can be reached direct toll free at 888-983-1632 regarding getting professionally pre-qualified, advisory & loan placement services.

Categories: Business Purchase Financing, Small Business Loans

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