When contemplating the sale of a business, an important consideration is how much of the purchase price you would be willing to finance for a qualified buyer. The reason is simple: “all cash” buyers or businesses are rare and, in most cases, it does not make economic sense for a buyer.
While sellers interpret financing as risk, statistics do show that sellers receive a significantly higher purchase price if they decide to offer some form of financing for the sale of their business.
With reasonable terms, the chances of selling increases and the time period to sell decreases. Seller financing communicates to the buyer that you are confident in the ability of the business to retire its’ own debt and in simple terms, “pay for itself”.
Seller financing offers many advantages that, when carefully considered, may outweigh the perceived satisfaction of waiting for all cash transaction.
- Seller financing greatly increases the chances that a business will sell.
- Seller financing command a higher selling price.
- Interest on the seller financed portion of the transaction can significantly add to the total proceeds received for the sale.
- Interest rates on seller notes are higher than money market or CD rank rates. Positive tax consequences compared to an all cash sale.
Whether you are financing the majority of the debt or just a portion of the down payment needed for the buyer to qualify for bank financing, there are many ways to structure a Seller Financed transaction.
Bank of Institutional Financing
Bank or institutional financing offer buyers attractive financing terms and interest rates which enable the buyer to facilitate his business acquisition. This can mean a lower down payment and lower debt service costs for the buyer. Both of these factors make your business attractive to buyers.
Bank or institutional financing can be very desirable to a buyer, but for a variety of reasons, not all businesses will qualify for a loan. VR maintains strong relationships with top lenders and will work closely with you to present your business in a manner acceptable for consideration.
Bank or institutional financing benefits:
- Often reduces the amount needed for a seller note.
- Lower down payment which increases the number of prospective buyers.
- Lower debt service creates high net income for the buyer.
- Typical loan term is 5-10 years.
Are you ready to learn more?
Valued Representation by your VR Intermediary will include exploring these and other types of favorable financing options available to you as a qualified buyer.