A Friday thought - 100% seller financing?

April 07, 2023

by a searcher from University of Virginia-Darden - Darden School of Business in Bethesda, MD, USA

As we all talk about SBA and bank lenders, I'm just curious, has anyone ever had or heard of a 100% seller note? What would be pros / cons / etc. Not actually happening - I'm just curious. This would be as if the seller is financing the sale in the role of the bank.

Thanks

2 Likes

6 Replies

203 Views

Replies

Reply by a professional
from Boston College in Baltimore, MD, USA

See these deals but it's most common in a sale from Seller to employee(s) of the business -- even then there are usually more tax efficient ways to transfer equity overtime (e.g. value freeze recapitalization). IMO - if third party buyer (searcher) is putting up no cash, just a seller note, buyer would have to have some distinguishing factors to make that deal attractive (which could be simply being buyer of last resort where no part of the employee base is capable).

Reply by a professional
from Villanova University in West Chester, PA, USA

Yes, especially if the seller is creative and an investor themselves, they might be interested in this. It may be a way to liquidate, receive a portion of the sale price in cash like stated above and then be able to maintain a return on their money without having to find somewhere else to put it provided that the percentage return on the seller's loan is comparable to or above market rates.

+4 more replies.

Join the discussion