Get Your Business Funded: Creative Methods for Getting the Money You Need

The Seller Financing Deal

Seller financing deals are usually fairly creative and can be flexible enough to account for any contingency or issue the buyer or seller cares to include. The deal will include the following provisions:

• Sale price
• Amount of down payment
• Interest rate
• Length of time on the note
• Terms of any balloon clause
• Specific description of what is being bought and sold, including: real estate, goodwill, inventory, other property, customer lists, intellectual property, stock, and signage
• Employment clauses: What will happen to current employees (are they guaranteed a job and if so, for how long?)

Additionally, the seller will want to include some or all of the following provisions:

• Security: Something needs to collateralize the loan, either a significant business asset or even the buyer's home.
• A personal guarantee on the part of the buyer.
• Other remedies in case of default.
• A life or disability policy naming the seller as the beneficiary until the note is paid off.

Another form of security for the ex-owner is something called a stock pledge. Here, the buyer forms a new corporation with the ex-owner as the majority shareholder. Provisions in the by-laws give the seller the right to force the new owner to make all payments due under the note and even gives the ex-owner the right to bring in new management in the case of a default. Just this provision alone usually means that the note is never defaulted upon.

The buyer will want these provisions:

• Seller assistance: ...