Buying a Business – Think about Seller Financing

This is an excerptfrom a Blog Posting By Domenic Rinaldi.  Domenic will be presenting “Buying a Businesss” Workshop at score on July 30th.   Information about the workshop is at http://bit.ly/BuyBusiness

…… The good news is that business acquisitions are possible without the government and banks. In fact, there was a time when banks played a minor role, if any, in small business acquisition lending. So, we now see the market retraining itself on the practice of SELLER FINANCING. In essence, the seller fulfills the role the banks have played, and in the process, gains back control of their goals. For obvious reasons, this form of financing is met with trepidation by sellers. However, with the proper guidance from seasoned advisors, these types of transactions can be more lucrative and provide better security for both sellers and buyers.

One recent transaction will serve to illustrate the need for sellers to embrace the idea of seller financing. We confidentially represented a business services firm in the Chicago area that had a 17-year track record, a stable client base and growing revenues. Our firm attracted multiple buyers and secured an offer from a private investor with solid financials. The deal structure was as follows:

50% – Buyer Down Payment
25% – Seller Note
25% – Bank Note

This business had physical (hard) assets on the balance sheet that exceeded the amount being requested in bank financing. The sellers had a long-standing banking relationship and offered to introduce the buyer to their banker, who was very bullish on this deal. The bank loan was difficult to get…..

The buyers and sellers were undeterred and we renegotiated the deal with the buyers. We increased their down payment and thus had the sellers fill the void left by the bank.

This type of financing requires tons of creative thinking, experienced advisors and motivated buyers and sellers.

Biz Broker Journal is at: http://www.bizbrokerjournal.com
Advertisements
Posted in Chicago small business, Financing and Loans, Management. Tags: , , , , , . Comments Off on Buying a Business – Think about Seller Financing
%d bloggers like this: