Owner financing is a method of financing a business sale where the seller provides a loan to the buyer to cover part or all of the purchase price. This arrangement allows buyers who may not qualify for traditional financing to acquire a business while enabling sellers to attract more potential buyers.

Characteristics
– Flexible Terms: The seller and buyer can negotiate the interest rate, repayment schedule, and other terms to suit their needs.
– Down Payment: Buyers often make a down payment, which can vary based on the agreement.
– Promissory Note: A legal document outlines the terms of the loan, including payment amounts and due dates.
– Potential for Higher Sale Price: Sellers may be able to command a higher price for their business since they are offering financing.
– Risk for Sellers: If the buyer defaults, the seller may have to go through the process of repossessing the business.

Examples
– A seller lists their restaurant for $500,000 and agrees to finance $300,000 of the sale price. The buyer makes a $200,000 down payment and pays the remaining balance over five years at a 6% interest rate.
– A small manufacturing business is sold for $1 million, with the seller providing $400,000 in financing. The buyer pays the seller monthly installments over ten years, allowing them to manage cash flow while growing the business.