Seller 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 the buyer to make payments directly to the seller over time, rather than obtaining a traditional bank loan.

Characteristics
– Flexible Terms: The seller and buyer can negotiate the interest rate, repayment schedule, and other terms to suit both parties.
– Lower Barriers to Entry: Buyers who may not qualify for traditional financing can still purchase the business.
– Potential for Higher Sale Price: Sellers may be able to command a higher price for their business since they are offering financing.
– Risk for the Seller: The seller takes on the risk of the buyer defaulting on the loan.

Examples
– A seller agrees to finance $100,000 of the $500,000 purchase price, allowing the buyer to pay it back over five years at a 6% interest rate.
– A business owner sells their company and allows the buyer to pay 20% upfront, with the remaining 80% financed by the seller over a 10-year period.