If you are looking for a qualified buyer for your business-for-sale, there is one solid way to stand out from others on the market and attract right buyers. This solid strategy can not only help you find the qualified buyer, but also it can help you successfully close a sale. This strategy is to offer seller financing. You can offer it as part of your purchase agreement. However, there are some really important things about using this approach that you should know in order to structure a perfect agreement that works for both you and the buyer. Let’s have a look at these things.
How Do You Define Seller Financing?
If you don’t know what is seller financing, read on. This is a type of financing when the seller or owner of the small business (in this case – you) provides financing to the qualified buyer for a chunk of the sale price. In most cases, sellers provide this type of financing for a small part of their business sale price. In this case, buyer needs to secure funding in order to finance the balance.
Both Parties Should Agree On Terms
It is true that seller financing will make your company more attractive to potential buyers, especially to those who are serious about buying but don’t have enough funds to purchase your business for sale. But you should also bear in mind that buyer is buying your company to make money for themselves. So, you should add those terms to the agreement that work for both of you. According to some experts, this type of financing can encourage seller to set a high asking price. It is advised to see and use this financing option as a means of closing the deal, not getting a higher price. In short, you should write your terms accordingly.
Seller Protection
When you offer this financing to buyer, you actually function as a lender. Lending institutions and lenders never lend money without making sure that borrower will replay their money. You should do the same to protect yourself. If the buyer cannot repay the financing within the agreed terms, make sure you have specific repercussions built into the business purchase agreement. For example, you can put this term into the agreement that you will re-acquire the business if the buyer cannot repay the loan. Other terms you can add are use of business’ real estate as collateral and personal guarantee from the buyer on the loan you are giving them.
Get a Lawyer Involved
Whether you are offering seller financing or not, t is important to get a professional lawyer involved in your business sale deal. A professional lawyer should out the sale terms and purchase agreement in writing for you, even if you are using a business broker. You should also make sure that your purchase agreement is written in proper language and it clearly states all important aspects.
On the whole, it is advised to learn everything about seller financing before offering it to the potential buyers.
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