How wonderful it would be if the banks welcomed business buyers with open arms and an open vault.
Sure, all those feel good TV ads from the banking industry like to convey a story of how customer friendly they are - just walk right on in and they'll lend you the money to realize your dreams.
Guess what? It won't happen. Never has, never will. To make matters worse,
So what about the other ninety-five percent?
Well, there are some cases of all-cash deals, but again they are very rare. There are some transactions amongst family members which may not include immediate transfers of money. And so, we are left with the vast majority of deals and likely around 80 – 90 percent of all transactions and these are undoubtedly done the common way – a buyer deposit and a note held by the seller.
While the terms can vary including interest rates, length and percentage of the total deal being financed, a general rule is for the seller to carry thirty to fifty percent at current interest rates plus a few percentage points over three to seven years.
Similarly, for most buyers, the only way they can acquire a business of the size required to generate the income they seek is to get seller financing.
So there you have it – it's just common sense:
And by the way, any broker who tells you that seller financing is not common, is full of it. At the same time, any broker who has told his seller client that they won't have to finance, should find another line of work.
Here's what to do:
This article represents a fraction of what you’ll learn on this topic in the How To Buy A Good Business At A Great Price© series - the most widely used reference resource and strategy guide for buying a business. To learn more click here
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