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Do You Have A Seller Financed Business For Sale? - Part 1

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Introduction

By Robert Duplicki      April 29, 2023

If you own a business, you might be asked the question "Do you have a seller financed business for sale?" And you could be asked this question by a variety of people. Depending on who asks, the conversation could take different routes, and hopefully you will receive plenty of helpful input. Since most small busineses are sold using some amount of seller financing, it's valuable to be prepared with an answer. This article will help to prepare you for those conversations.

The first person that could ask this question is yourself. Do you have a seller financed busines for sale? Would you for the right price? Is selling your business part of a long term plan? Even if you have no intention of selling your business in the near future, time and circumstance changes everything. Consider what I discuss in Seller Finance Your Business In 2023

Let's assume the answer is yes, that you do have a seller financed business for sale. What might the following conversations be like?

A Blogger

You might not be interested if a blogger asks you "Do you have a seller financed business for sale? But consider being interviewed about this topic for a blog article. You could use this opportunity to prepare yourself for the possibilities in a non-stressful way.

You could provide details about the business for sale, such as the industry, size, location, and any unique selling points. Also highlight the benefits of the seller financing arrangement, such as making the business more attractive to potential buyers and facilitating the sale process.

Additionally, you could also provide an explanation of how buyers have successfully purchased businesses with seller financing, showcasing the positive experiences of past buyers and the potential advantages of choosing a seller financed business.

Further, it would be beneficial to discuss your experience and expertise as a business owner, providing insights and valuable information to the blogger about the business, the industry, and the financing arrangement. This could help the blogger create informative and engaging content for their audience, and generate interest and inquiries from potential buyers.

You may need to address any potential risks or concerns that the blogger or their audience may have, and provide reassurance or mitigation strategies. Being transparent, responsive to inquiries, and providing accurate information can help build a strong relationship with the blogger and create a positive impression among their audience.

What is a potential answer if your business partner asked the question?

If your business partner asked the question, "Do you have a seller financed business for sale?" the potential answer would depend on your intentions and the existing partnership agreement. If you are planning to sell the business and are open to offering seller financing, you may discuss this option with your business partner and provide details about the terms and conditions of the financing offer. You will need to take into consideration your partnership agreement and any legal or financial implications.

Of course your partner may or may not be pleased with your answer. You should be prepared to spend the necessary time getting your partner on board with your plans. You might want to encourage a brainstorming session to generate ideas and then agreement on how to proceed.

What is a potential answer if a bank asked the question?

Let's say you are meeting with your banker and the question is asked, "Do you have a seller financed business for sale?" If you are considering such a sale, what would you tell your banker, and what helpful information might the banker have for you?

You might start by talking about how you decided to sell your business, what you plan to do with the proceeds from the sale, and why you are offering seller financing. Do you plan to buy another business? Is this process already underway, or not for a year or two? In what ways do you forsee your bank being involved? Even though bank financing is difficult to obtain to purchase a small business, would your banker be willing to consider some financing because you are offering seller financing?

Could your bank collaborate with you in creating a mutually acceptable financing agreement based on the buyer of your business meeting certain bank requirements. Would this be more likely if you were willing to stay involved as a consultant to the busines buyer for one year?

What might a CPA offer in response to help the business seller?

As a Certified Public Accountant (CPA), the response to a business seller who has a seller financed business for sale would typically involve providing financial and tax-related guidance to help the seller navigate the transaction. Here are some potential services that a CPA may provide to help the business seller:

  • Financial Analysis: The CPA may conduct a thorough financial analysis of the seller's business to assess its financial health and provide insights into its valuation. This may involve reviewing financial statements, tax records, and other relevant financial information to determine the business's profitability, cash flow, and overall financial performance. The CPA may also assess the financial implications of the seller financed arrangement, including the impact on the seller's cash flow, tax obligations, and overall financial picture.

  • Tax Planning: The CPA may provide tax planning strategies to help the seller optimize their tax position in the sale of a seller financed business. This may involve reviewing the tax implications of the seller financing terms, such as the treatment of interest income, capital gains, and other tax considerations. The CPA may also advise on strategies to minimize potential tax liabilities and maximize after tax proceeds from the sale.

  • Deal Structuring: The CPA may provide guidance on structuring the seller financed arrangement to align with the seller's financial and tax objectives. This may involve advising on the optimal terms of the seller financing agreement, including the down payment, interest rate, repayment schedule, and other relevant terms. The CPA may also assess the financial feasibility of the seller financed arrangement and its impact on the seller's financial goals and retirement plans.

  • Record Keeping and Compliance: The CPA may provide guidance on maintaining proper record keeping and compliance with tax laws and regulations throughout the sale process. This may involve advising on the documentation requirements, record retention, and compliance with tax reporting obligations related to the seller financed transaction. The CPA may also assist in preparing the necessary tax forms and filings, such as Form 6252 (Installment Sale Income) and Form 1099-INT (Interest Income), to ensure compliance with tax laws.

  • Financial Planning: The CPA may offer financial planning advice to help the seller plan for their financial future after the sale of the seller financed business. This may involve assessing the seller's financial goals, risk tolerance, and other personal financial factors to develop a comprehensive financial plan that takes into account the proceeds from the sale, the seller financed arrangement, and other assets and investments.

  • Due Diligence: The CPA may assist the seller in conducting due diligence on potential buyers, especially with regards to their financial capabilities and creditworthiness. This may involve reviewing financial statements, credit reports, and other financial information of potential buyers to assess their ability to fulfill the seller financing obligations.

  • Coordination with Other Professionals: The CPA may network and collaborate with other professionals involved in the sale process, such as attorneys and business brokers to ensure a smooth and coordinated approach. This may involve working closely with other professionals to align financial and tax strategies, ensure compliance with legal requirements, and optimize the overall outcome of the seller financed sale.

What might local government say in response to help the business seller?

Local government agencies may have resources and programs in place to support businesses within their jurisdiction. Here are some potential responses that local government could provide to help a business seller with a seller financed business for sale:

  • Business Assistance Programs: Local government agencies may have business assistance programs that provide resources, support, and guidance to businesses looking to sell, including information on marketing, financing, and legal requirements. These programs may also offer workshops, seminars, or counseling services to help business sellers navigate the sales process.

  • Access to Business Networks: Local government agencies may have networks or partnerships with other business organizations, chambers of commerce, or industry associations that can connect business sellers with potential buyers or provide exposure for their business sale listing.

  • Regulatory and Compliance Guidance: Local government agencies can provide guidance on regulatory and compliance requirements related to the sale of a business, such as permits, licenses, zoning regulations, and other legal obligations. This can help ensure that the business seller is aware of and compliant with all relevant laws and regulations.

  • Tax and Financial Assistance: Local government agencies may have tax and financial assistance programs in place for businesses, including potential incentives or exemptions related to the sale of a business. These programs can provide financial relief or support to business sellers during the sales process.

  • Referrals to Professional Services: Local government agencies may have a network of professional service providers, such as attorneys, accountants, or business brokers, who can provide specialized assistance to business sellers. They can provide referrals to qualified professionals who can offer expertise and guidance throughout the sales process.

  • Market Information and Analysis: Local government agencies may have access to market data and analysis, including industry trends, demographics, and economic indicators, which can help business sellers make informed decisions about pricing, marketing strategies, and potential buyers.

  • Supportive Communication: Local government agencies can provide supportive communication and guidance to business sellers, addressing their concerns, answering their questions, and offering assistance throughout the sales process. This can help business sellers feel supported and confident as they navigate the complex process of selling their business.

What might a business broker say in response to help the business seller?

As a business broker, the response to a business seller who has a seller financed business for sale would typically involve providing guidance and assistance in the sale process. Here are some potential services that a business broker may provide to help the business seller:

  • Marketing and Promotion: The business broker may create a comprehensive marketing plan to promote the seller financed business to potential buyers. This may involve utilizing various marketing channels such as online listings, social media, print media, and targeted outreach to contact a wide audience of potential buyers. The broker may also leverage their professional network and connections to attract qualified buyers who may be interested in a seller financed opportunity.

  • Pricing and Valuation: The business broker may assist the seller in determining the appropriate pricing and valuation for their business, taking into account various factors such as financial performance, industry trends, market conditions, and seller financing terms. They may provide a realistic and market driven valuation to help the seller set a competitive price that aligns with the seller financing arrangement.

    To help you get a head start to determine the value of your business, have a look at my article Valuing Your Business For Resale And To Sell Your Business Note

  • Confidentiality and Privacy: The business broker should prioritize maintaining confidentiality and privacy throughout the sale process to protect the seller's sensitive business information. This may involve pre-screening potential buyers and implementing strict confidentiality agreements, while managing the dissemination of information to qualified buyers.

  • Buyer Qualification and Due Diligence: The business broker may conduct thorough buyer qualification and due diligence to ensure that potential buyers are financially qualified and serious about the business acquisition. This may involve verifying the buyer's financial capabilities, conducting background checks, and assessing their suitability as a potential buyer for a seller financed business.

  • Negotiation and Deal Structuring: The business broker may assist the seller in negotiating the terms and conditions of the sale, including the seller financing arrangement. This may involve working closely with the seller and potential buyers to find mutually acceptable terms, including down payment, interest rates, repayment schedule, and other relevant terms of the seller financing agreement.

  • Coordination and Facilitation: The business broker may act as a facilitator throughout the sale process, coordinating and liaising between the seller, potential buyers, attorneys, accountants, and other professionals involved in the transaction. They may ensure that all necessary documents, agreements, and legal requirements are properly executed and completed in a timely manner.

  • Expertise and Experience: The business broker may provide their expertise and experience in selling businesses, including seller financed businesses, to guide the seller through the complex process. They may offer valuable insights, market knowledge, and negotiation skills to maximize the seller's chances of a successful sale.

What is a potential answer if a business buyer asked the question?

A business buyer might ask this question instead: "Why should I consider a seller-financed business for sale?" Whether they do or not, you should be prepared to make a strong case highlighting the advantages of purchasing a business with seller financing. Here are some potential benefits that a business seller could convey to a business buyer:

  • Access to Financing: Seller financing provides an additional financing option for the buyer, especially if they may not qualify for traditional bank financing. It can offer an opportunity for the buyer to obtain financing directly from the seller, which can be more flexible and accessible compared to traditional lending options.

  • Negotiable Terms: Seller financed businesses for sale often allow for more flexibility in negotiating the terms of the financing arrangement. The buyer and seller can work together to agree on mutually beneficial terms, such as the down payment, interest rate, repayment schedule, and other relevant terms. While the seller decides what is acceptable, the buyer gets an opportunity to customize the financing arrangement to meet their specific needs and financial capabilities.

  • Faster Closing Process: Seller financing can often result in a faster closing process compared to traditional financing methods, as it eliminates the need for lengthy loan applications, underwriting, and approval processes. This can result in a quicker transaction and allow the buyer to take ownership of the business sooner.

  • Show of Confidence: A seller who is willing to provide financing for the business they are selling may be seen as having confidence in the business's future success. This can provide reassurance to the buyer that the business is viable, and that the seller believes the buyer can continue a proven track record.

  • Win-Win Solution: Seller financing can create a win-win situation for both the buyer and the seller. The buyer gets access to financing that may not be available through traditional channels, while the seller may receive additional income from the interest payments on the seller financed portion of the sale. It can also facilitate a smooth transition of ownership and foster a positive relationship between the buyer and the seller.

  • Relationship with Seller: Seller financing can foster a closer relationship between the buyer and the seller, as they continue to have ongoing interactions through the financing arrangement. This can provide an opportunity for the buyer to leverage the seller's experience, knowledge, and guidance as they transition into ownership of the business.

What is a potential answer if a note broker asked the question?

If a note broker asks the question, "Do you have a seller financed business for sale?" the seller could welcome the opportunity to talk with someone who has a unique perspective about seller financing. While the seller has become somewhat familiar with the process of using seller financing to sell a business, it may not be understood yet that the promissory note created in doing so, is an asset that can be sold for cash.

The seller should provide details about the business for sale, including its industry, size, location, and any unique selling points. The seller could also explain the process that lead to offering seller financing.

The seller should provide information about the potential seller financed note, including its terms, such as the down payment interest rate, repayment schedule, and the collateral that would secure the note. The note broker could give an opinion about these factors. They could also discuss the importance of determining a buyer's credit history and financial strength.

The seller could emphasize the performance and stability of the business, showcasing its financial performance, customer base, and growth prospects. They could also discuss the likelihood of successful repayment of the note based on the viability of the business moving forward.

The note broker would prepare the seller for the type of information the will be needed to evaluate a note for sale. This would involve sharing documentation such as a copy of the note, the security agreement financial statements and business valuation reports to support the note's value and facilitate the note broker's evaluation process.

The note broker could explain what is involved in the process of selling a note. The seller should be advised that seller financed notes are sold at a discount and the thinking behind this.

It's essential for the seller to provide complete and accurate information to the note broker at such time as the seller decides to sell the note. This conversation would provide an opportunity to prepare the seller for the note selling process. But it is not essential. In fact most note sellers will not speak with a note broker or a note buyer until beginning the process of selling a note. It's really better to have a resource such as this website that provides far more information about seller financing, creating notes and selling notes than could be included in a conversation, without the need to memorize it.

If you have a note for sale, get started now. please submit a business note worksheet, and I will start working to produce a deal for you.


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  1. Photo by Adeolu Eletu on Unsplash.

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