Exit Strategy: The Art of Selling a Business by Sheldon Manheim

Author:Sheldon Manheim [Manheim, Sheldon]
Language: eng
Format: mobi
Publisher: USPublications.com
Published: 2010-11-01T04:00:00+00:00

SELLER FINANCING

The next alternative is seller financing. This can be a quick and easy way to finance a deal, as well, but there are often some negotiations that go on that can slow up the process. One of the main benefits of seller financing is that is will delay any tax liability on the sale, and help spread it over a period of years. In this situation, the seller basically becomes the bank and assumes all risk of repayment. The main question arises as to what will happen, should there be a default on the note. This is a situation in which having qualified attorneys, whose primary field involves business acquisitions, pays off. You will want to align yourself with advisors that will help, not hinder the process of buying a business. Another risk in seller financing, from the buyers perspective, is that there may not be a third party assessment of the deal quality, which is what you get from a lender review.

Seller financing is also an alternative to be considered when the underlying tax returns do not support bank financing for the purchase. Many times, for these types of purchases, a combination of seller financing and owner equity will be enough to get the deal closed. Seller financing indicates confidence on the part of the seller that the business will generate enough cash flow for repayment of the loan.

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