Sunset Business Advisors
  • Home
  • Sellers
  • Buyers
  • Business Valuations
  • About Us
  • Blog
  • Contact Us

Benefits of Seller Financing

5/15/2017

0 Comments

 
Are you preparing to sell your business? Take some time to think about what type of financing your potential buyer will need. Should you be willing to invest your own capital into the sale of your company?  What are the benefits and risks?  Let's first discuss the benefits.

Benefits of Seller Financing

Speedy Sale
Offering seller financing can expedite the time it takes to sell your business. With a limited amount of third-party capital, such as a traditional bank loans, having the option of seller financing on the table can increase the appeal of your business to potential buyers and speed up the selling process. If you are offering to front funds toward the sale, consider including your willingness to finance in your sale listing.

Price
Although the purchase price of your business will ultimately be determined by the market, offering financing to buyers will often yield a higher purchasing price than cash or commercially financed deals. Owner-financed businesses are typically more appealing to buyers, resulting in higher sale prices. 

Income
This means you will receive interest income beyond the actual purchase price. The interest rate is usually based on the current commercial rates.  This added income is a nice perk over just receiving the proceeds from the sale upfront.

Taxes
When you fund part of the purchase price, you effectively stretch out the financial gains received from the sale of your business over a longer period of time. This means your taxable income from the sale is also spread out. While it is generally easier financially to spread out the taxes owed from the sale, consult a financial or tax advisor on how it will affect your specific tax situation.

Buyer Confidence
Offering seller financing can help show your confidence in the business you’ve built and inspire confidence in your buyer. Much like any other major purchase, buyers are weary of getting a “lemon.” A willingness to stay invested in your business can help quell the fears a buyer may have about any underlying problems with the business and its long-term success.

Negotiations
When negotiating with your prospective buyer, you can use seller financing as a powerful bargaining chip, particularly if you are already interested in remaining involved with how the business operates post-sale. Seller financing can often be used in exchange for other concessions during the negotiation process.
0 Comments



Leave a Reply.

    Jeremy Hovater

    President, Sunset Business Advisors

    Archives

    June 2017
    May 2017
    April 2017
    December 2016
    November 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015

    Categories

    All

    RSS Feed

Powered by Create your own unique website with customizable templates.
Photo used under Creative Commons from bvi4092