The Ins and Outs of Seller Financing
With the myriad of questions and concerns that accompany your decision to sell your business, a major one is seller financing. Here at The Firm, we’re experts at helping sellers secure financing, so we are happy to offer insight.
What Is Seller Financing?
Seller financing — otherwise known as seller carryback, seller carry or owner financing — is a loan from the current business owner. While it could be a primary funding source, seller financing is typically used as a portion of capital stack to complete the deal. The business owner provides this loan to the buyer, and the buyer must make monthly payments to repay the loan in full.
Like any loan, seller financing accrues interest ranging anywhere from 5 to 10%, which the buyer is also responsible for.
Benefits to Sellers
Although it may seem like a risk, seller carry is extremely beneficial to both parties. For sellers, carryback:
- Attracts potential buyers
- Speeds up the closing timeline
- Offers more money
- Increases sale price
Benefits to Buyers
Seller financing is great for buyers because it:
- Allows for cheaper financing from outside sources
- Provides an additional funding resource
- Speeds up the closing timeline
- Fills financing gaps
Buying and selling a business is tough work, but at The Firm, we work to make it easy for both sides. We often suggest a standard 10% seller carryback as an effort of good faith. Through proper vetting and qualification processes, we help ensure that our seller’s money will be in good hands with a new owner.
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