90% of Small Business Sales Use THIS Trick – Are You Missing Out?

When it comes to buying or selling a small business, traditional bank loans can be a major roadblock. But what if there was a way to close the deal faster, attract more buyers, and increase your chances of success? The answer is owner financing—a strategy used in up to 90% of small business sales today!

Whether you're a seller looking to move on or a buyer struggling to secure financing, this powerful tool could be the key to making your deal happen. Let’s break down how it works, why it’s so popular, and what you need to know before jumping in.

What Is Owner Financing and How Does It Work?

In a traditional business sale, the buyer secures a loan from a bank or lender to cover the purchase price. But with owner financing (also known as seller financing), the seller steps into the lender’s shoes, allowing the buyer to make payments over time.

Example Scenario:

A small manufacturing business is listed for $500,000. A buyer is interested but only has $200,000 for a down payment and struggles to get a bank loan for the remaining $300,000. Instead of walking away, the seller agrees to finance the remaining balance over five years at 6% interest. The buyer gets the business, and the seller earns interest on top of the sale price.

Why Would a Seller Offer Financing?

At first glance, it might seem risky for a seller to act as the lender. But here’s why many business owners choose this route:

• Attract More Buyers – Many buyers don’t qualify for bank loans, so offering financing expands the pool of potential buyers.

• Faster Sales Process – No waiting on bank approvals, meaning deals close weeks or months faster.

• Higher Sale Price – Businesses offering financing often sell for more because buyers value the flexibility.

• Steady Income Stream – Instead of a lump sum, sellers receive monthly payments plus interest, creating a reliable income post-sale.

Why Would a Buyer Use Owner Financing?

For buyers, owner financing can be the difference between landing their dream business or walking away empty-handed. Here’s why:

• Easier to Qualify – Banks have strict requirements, while sellers can be more flexible.

• Less Upfront Cash Needed – With a lower down payment, buyers can preserve their capital for operating expenses.

• Flexible Terms – Buyers and sellers can customize the agreement to fit their needs.

• Faster Deal Closures – No waiting on bank approvals means buyers can take control of the business sooner.

The Risks and Downsides

While owner financing offers huge advantages, both buyers and sellers should understand the potential pitfalls.

For Sellers:

• Risk of Buyer Default – If the buyer stops making payments, the seller may need to take legal action or repossess the business.

• Delayed Full Payment – Instead of receiving all the money upfront, the seller gets paid over time.

• Ongoing Involvement – Some sellers don’t want to stay financially tied to the business after selling.

For Buyers:

• Higher Interest Rates – Seller financing may come with higher rates than traditional bank loans.

• Shorter Repayment Terms – Many sellers require full repayment in 3-5 years, leading to higher monthly payments.

• Personal Guarantees – Many agreements require the buyer to put up personal assets as collateral.

What Happens If a Buyer Defaults?

If a buyer fails to make payments, the consequences can be serious:

• Repossessed Business – The seller may reclaim the business, leaving the buyer with nothing.
  Legal Action – The seller can sue for damages or seize personal assets if a personal guarantee was involved.
  Credit Damage – A default can ruin the buyer’s credit score and business reputation.

Is Owner Financing Right for You?

Owner financing can be a win-win for both buyers and sellers—but only when structured correctly. A well-drafted agreement, proper due diligence, and clear communication are critical to avoiding potential risks.

Thinking about selling your business and offering financing? Or looking to buy a business but need flexible funding options?

I specialize in facilitating complex business sales and acquisitions. Contact me today to explore your options and structure a deal that works for you!