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The Seller Finance Specialists

Are you tired of trying to Sell your Business and it is still not sold?

If so, please read on:


You will no doubt be surprised to learn approximately:

  • 90% of all of the people who begin the search to buy a business never complete a transaction

  • Only 20% of all of the businesses listed for sale ever sell.

  • Business brokers only account for 10% of all transactions.

  • Roughly 50% of the deals that are agreed to between buyer and seller, never get to completion


(Source: About the author:  Richard Parker is founder of Diomo Corporation - The Business Buyer Resource Center™, and author of numerous guides including the best-selling How To Buy A Good Business At A Great Price© series.

Before we discuss “Seller Finance”, we need to state that the best way to sell any business from the seller’s perspective is an outright sale i.e. where the seller obtains all the money for his or her business (whether selling shares or assets and goodwill) at the point of the business sale transaction occurring i.e. from day one. However, in our experience and in the experience of other professionals within the business transfer sector, an outright sale is a rare event. Thus we need to explore “Seller Finance” as follows:

Are you tired of trying to sell your business in the usual way by appointing a Broker or Web based company to simply advertise it and hope for the best? Have you paid a large up-front fee to a Broker or monthly costs to a web based advertising firm and it's still not sold?


NOTE: This article is the sole and exclusive copyrighted property of Diomo Corporation and may not be reproduced in any format whatsoever without the express written consent of Diomo Corporation. All Rights Reserved.)

To add more weight to the above quotation, according to the International Business Broker Association (IBBA) and many listing sites for businesses for sale, only 18% of all business are actually ever sold. For those that do sell, its about the ability of the seller to transfer the business process to a new owner for a fair price for the buyer and not what your uncle, accountant, lawyer or others say the business was worth. The buyer has to be able to pay for the business out of the cash flow from the business and pay themselves reasonable compensation. 


To add even more credence to the statistics on selling a business, please look at the statement by the well known UK Business Transfer specialist and author, Mr Roger Stirling Smith, who says in his book: "Traditionally, many SME deals never get anywhere near legal completion and only about 20% on the market ever get serious buyers and out of those, 2 out of 3 deals fall through, for a whole variety of reasons"

Source: the book entitled: "Sell your business FAST" - avoid the biggest mistakes, crazy low offers and dodgy brokers!"

by Roger Stirling Smith (web site:

Do you know someone or have a key employee or employees who we could approach to see if they want to buy your business? We can arrange funding via a number of methods, so the prospect buyers may not need much money themselves. 

Let’s look at using Seller Finance as an alternative to traditional methods of selling your business. 

“Since the 2007 credit crunch, with banks still highly risk-averse, seller financing is arguably more important than ever to the buying and selling of businesses” (Source: Adam Bannister)

For the right Seller and the right Buyer, Seller Finance, also known as Vendor Finance and Earn Out in the UK, is a very real way to sell your business.

If the business for sale is mostly made up of bricks & mortar, fixed assets and debtors with a small percentage of the value being “goodwill”, then it may make sense for both the seller and possibly the buyer to raise finance using the assets as collateral and buy the business with one cash payment.  However, often a business value is mostly “goodwill”, which makes raising money an extremely difficult (if not impossible) task for a potential buyer.

Seller Finance or Vendor Finance

Seller Financing – a USA Term for Vendor Finance or Earn-Outs in the UK

What exactly is seller financing?

(source Adam Bannister – extract from

It is in effect a loan given by the seller of a business to its buyer, usually on similar terms to a bank loan. 


As with a conventional bank loan, the seller will usually make a down payment and pay up the remainder in monthly instalments over a pre-agreed time period.

The terms of the deal are set out in a legally binding purchase agreement that is created with the help of a solicitor and signed by both parties.

What if the buyer defaults?


Again, it's similar to a bank loan, insofar as the business is repossessed or foreclosed.

Doesn't that mean the seller is at risk of not getting all of his or her money?

Yes. Just like a bank, the seller is shouldering the risk. If the buyer mismanages the business it could be hard work restoring the business to its previous value when you repossess the property, while you then have to go through the process of finding a buyer all over again.

The extra risk means the seller can usually set a higher interest rate than a bank ordinarily would.

It still seems like quite a big risk if you are selling your business?

Well if the business has an unimpressive track record or operates in an ultra-competitive sector, then seller financing could improve the chances of closing a deal significantly. The fact a seller is willing to gamble a huge portion of the sale price on the business's future performance should reassure the buyer, who will therefore often pay a higher price, 

So long as you have confidence in the buyer's experience, attributes and attitude, as well as faith in your business, then you can be confident of getting your money. 

Since the 2007 credit crunch, with banks still highly risk-averse, seller financing is arguably more important than ever to the buying and selling of businesses.

Any drawbacks for the seller?

Well you need to wait for much of your money of course. If you need access to most or all of the asking price immediately - to fund another business acquisition for example - then seller financing won't be suitable, unless used in conjunction with other forms of finance or a large down payment.

And with seller financing you'll have a less complete picture of the purchaser's creditworthiness and employment history, thereby further heightening the risk. 

By contrast, if the deal is financed with bank credit then the seller gets his or her money straightaway and does not shoulder the risk in the event of a default. 

How can sellers minimise the risk?

By making sure the buyer is the right person to run their business successfully. Many sellers care about the fortunes of their business after the sale because of their emotional investment in the business, but if you've financed the sale of your business partly from your own pocket then you have an ongoing financial investment too.

To reduce the risk of a default be sure to sell only to a buyer you believe has the right attitude, experience and attributes to take the business forward. 

Are there any benefits for buyers?

As mentioned above, if the vendor offers to part-finance the deal then it suggests to the buyer that they're sincere when they expound the business's merits - and who knows more about the business than the present owner?

A buyer will often be more flexible with repayment terms than a bank, while both parties will make considerable savings in closing costs.


When structured properly and applied in the appropriate circumstances, an earn-out or seller finance deal can be a "win-win" situation for both buyer and seller. The seller will be financially rewarded for the anticipated future value of the business, while the buyer avoids overpaying for untested potential and ensures that the seller remains motivated during the handover period. If the targets for the earn-out are met, the seller receives an excellent price for his business (the sum paid out from the deferred part of the deal can in some cases be more than the initial amount received at completion), while the buyer is happy to pay the consideration, as he is now the owner of a highly profitable and valuable business. However, the flip side of this is that earn-outs are complex transactions that carry a significant "unknown" element for both parties, and there are many pitfalls that can lead to disaster if the terms of the deal are poorly set out.


Please contact us as we have specialist knowledge in putting “Seller Finance” deals together. We know the pitfalls.

We work with corporate lawyers who also know how to produce seller finance legal agreements for sole traders, partnership and limited company entities.


For both Buyers and Sellers, we can help YOU
Want to get in touch? Please contact us...

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