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When buying a business you can ask for vendor finance
| Guest post by: Russell Bowyer |
Article Overview: When you buy a business you don’t always have all the funds necessary to complete the purchase and in today’s economic climate, with banking finance being more difficult to come by, vendor finance might be the only way the business gets sold. Vendor finance might be the best option for you as a buyer, but also for the vendor in that this will make sure the deal happens.
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When buying a business you can ask for vendor finance
When you buy a business you don’t always have all the funds necessary to complete the purchase and in today’s economic climate, with banking finance being more difficult to come by, vendor finance might be the only way the business gets sold. Vendor finance might be the best option for you as a buyer, but also for the vendor in that this will make sure the deal happens.
So you might ask, what is vendor finance?
Vendor finance is where the person selling the business is happy to lend the purchaser part or all of money need to buy it. If this concept is new to you, then you may well be thinking, why would the vendor of a business lend someone money to buy their business? This is a good question and is worth explaining further.
For example, if you were to buy a business for £180,000, and you are unable to get the whole purchase price together and on the assumption that you have say £80,000 of the purchase funds and you are unable, for whatever reason, to raise the £100,000 balance. In this situation you could ask the vendor of the business to take the £80,000 as a down payment on the purchase date, with the balance of the purchase price to be paid by instalments.
The period of the “vendor loan” will need to be agreed between you as the buyer of the business and the seller and the loan can be repaid out of the profits of the business. The vendor can insist on charging interest on the loan and it would up to you to agree on the rate charged with the vendor. The vendor might also request security for the loan, which might mean that it be secured on your home or other property you own, or alternatively, where you don’t own any property, on the business itself.
Benefits of “Vendor Finance”
One quite obvious benefit is that the transaction can complete, which keeps the vendor happy and you are able to buy a business that you would ordinarily not be able to afford.
If the vendor is willing to provide vendor finance this will be showing the would-be purchaser a level of confidence in the business.
Disadvantages of providing “Vendor finance”
The business might go bust during the vendor loan period, which would mean that the loan would not be able to be paid.
The vendor does not receive all the monies for the business upfront, however, at least a sale is made and where interest is charged on the loan, normally at a higher rate than a bank would pay, the vendor will receive a good return on the loan.
Advice for vendors
Make sure you receive a substantial payment up-front and I would recommend no less than one third of the selling price. This will qualifying your purchaser and you don’t want to sell your business to someone and then a few months down the track, find that they have messed things up and you had no money up-front.
Do take up some form of credit referencing on the purchaser to make sure that they have no bad credit history, thereby making the whole transaction a higher risk.
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Article Tags: buying a business, economic climate, how to buy a business, vendor finance
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About the Author: Russell Bowyer RSS for Russell's articles - Visit Russell's website Click here to visit Russell's website   How much money do businesses spend on advertising each year A positive workout for your brain for business owners and wouldbe business owners alike How do I sell my business How to start a small business Minimum wage good or bad for business |
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Re: Is it worth buying a Dell computer with financing?
- what you should know is that whenever you are buying any item and apying monthly you are definitely paying at least 50% more than if you buy it cash. I beleive on the long run it is worth buying the computer with finance if you are using it for business. My rules about buying things on credit is basically for business and nothing else.
Proper planning to get investors
- Investment is very easy to get once you have the complete idea show it to the local finance company, they can get you investors with a basic fee, since they know your business and status etc, also local presence of finance firm will help investors feel easy to check on growth of you business.
It will be difficult to get direct investors for your business without proper planning and reports.
Re: looking for experienced affiliate feedback
- Hi Nancy,
I don't have any direct experience with trying to sell my own products as a vendor, but as far as I know, you can set up a vendor account with Clickbank for a one-time fee of $50. This may be per product, but it's only a one-time payment. Affiliates will find your product through searching the marketplace and will promote it if they like it.
I would suggest going this route to start. Plus, Clickbank handles all affiliate payouts for you, whereas with PayDotCom, you are responsible for paying the affiliate directly.
Hope that helps,
Alan
Finance is the basic requirement
- Without finance no one is going to stand next to you, your employees join your company looking at your financial situation and growth, if you don't have enough finance then better do a job.
Re: Those Annoying Telemarketers
- Use caller id to your advantage. Sometimes telemarketers have useful business tools for you to use, so it doesn't always pay to be rude or hang-up on them.
You might consider setting up a separate "vendor" voice mail box. On the welcome message, state that you are really busy and that you receive many cold calls a day, but might be interested in the service they have to offer. State that you review the "vendor" voice mail box about every other week, and that you do actually listen to their pitches. Invite them to leave a message to be reviewed, an let them know that if you are interested in their product, you will return their call.
I think this is a fair balance between saving you time, not being interrupted by telemarketers but at the same time lettering those telemarketers try to get their message through to you.
--matt
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