A buyer with 100% cash is rare. A buyer wanting 100% financing is dreaming as there is no such thing as 100% financing on a business – anyone who tells you that there is 100% financing is a liar!

So it goes without argument that some sort of financing will be needed to close the deal. There are various options for financing that are covered below with the understanding that buyer qualification is the key ingredient to obtaining financing for the buyer. You want to close right and get paid right? The ability to finance a buyer is the make or break point of getting to closing.

Before jumping into the three main financing categories, let us dispel one myth and that is the misconception that the owner HAS TO hold a note or mortgage on the business to get a deal closed. This is not true and it totally rests with the individual owner’s preference. We will advise that selling a business with some amount of owner held financing does make it slightly easier to sell. But we always advise owners to speak with an accountant about the pros and cons to holding the loan on their business. 

Three Types of financing…

1. Owner held financing is one option but see the last above paragraph to dispel the myth that an owner has to hold financing. We always advise owners to speak with an accountant about the pros and cons to holding the loan on their business. There may be some tax benefits to doing it this way.

2. Local bank SBA financing is very difficult for a buyer to secure in the small business for sale environment. It is also the primary reason why there is the misconception that lender financing is difficult.  But there is a third and viable option – Acquisition financing.

3. SBA Acquisition financing from third party lending sources is the primary lending source used to fund buyers of small businesses. These sources are specifically in business for small business lending. Most business owners – and business buyers - do not know of these types of lenders nor do they have the contacts to use them successfully.