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Is there a down side to seller financing?

I know what's in it for me but I want to be prepared to address pushback (from a seller) or at least, anticipate the kinds of concerns I may face.

John Sarzoza

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Answers (3)
Steven St
World Business Partners, Inc
Los Angeles County, CA

Seller financing

1. Buyer doesn't pay - They may have to litigate to get the business back and it won't be worth anything once they do get it back.

Answer:

1.Have a rock solid business plan and a super star management team. Give the Seller confidence that you know what you're doing and he's going to get paid.
2. Substitution of collateral - Give him another form of collateral in addition to or instead of the business.
3. Tell him that you want him to have a stake in your success. Giving a Seller all cash is foolish. The Seller then has no need to care if you succeed or fail. Sellers may also want all cash because they do not believe in the business. Tell the Seller you want to know that he has faith in his business and in you. There's no other way to do that besides living some money in the pot.

2. Seller wants all of the money now!

Answer:
1. Why?
2. How much do they really need (not want).
3. is it reasonable.
4. Are you getting a good ROI.

There are many ways you can answers most of their objection but the plain truth is the overwhelming majority of business Sellers are going to do some kind of Seller financing so they just need to get off their high horse and get with the program.

Hope this helps.

Apr 25, 2009
Andrew Cagnetta
Transworld Business Brokers, LLC.
FL
Premium Broker

For the seller, the down side is the buyer not paying the note and then having to litigate to get the business back. For the buyer, seller's notes can be too short term and debt/earnings ratios can get out of kilter.

Apr 4, 2009
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Franchise Advisory Group
PA

John, Please read my blog on the subject and if you have any questions, do not hesitate to ask.

http://franchiseadvisorygroup.net/blog/view/116/as_the_banks_are_tightening_lending__seller_financing_may_be_a_great_option_to_finance_a_business_acquisition_

Apr 4, 2009

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