Seller Financing Becomes Popular Alternative

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As credit and borrowing standards tighten, seller financing is becoming more common.

For those selling small business, the ability to offer it is particularly important.

“Sellers really have to be prepared to take back more of the financing or to take a second position behind the banks to make them come together … because of the financial situation of the world today,” says Wally Kocemba of the BizDealer Team at Calhoun Companies, a business brokerage firm in Minneapolis.

While considered riskier than bank financing, seller financing — which is sometimes combined with bank financing — can offer owners a better price and a faster transaction.

“I believe sellers are going to have to understand that if they want to obtain the price that they’re looking for, they may have to consider seller financing as an integral part of the transaction,” says Dean Bachelor, chairman and founder of the Platinum Group, a private-equity firm in Eden Prairie. “If they believe in the business and believe in the future of the business, that’s less of a problem.”

Source: Minneapolis Star-Tribune, Todd Nelson (09/29/08)

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