Many small business sales are seller-financed. There are several important questions you should ask yourself if you are considering financing the sale of your business:
- What is the lowest amount of cash you are willing to accept?
- Have you considered what must be paid from the cash received? Suppliers, vendors, other accounts payable, lenders and other unsecured creditors, expenses related to the sale, etc.
- What is the cash value of assets not being sold: cash held in the business, accounts receivable, refundable deposits, etc?
- Is there long-term debt that might be assumed by the buyer? This could leave more cash available to go to the seller.
- What is an appropriate interest rate for a seller-financed loan?
- What are the tax issues related to seller financing?
The most important question, ultimately, is:
- Will the business be able to service the debt and still be able to provide a living and a return to the buyer?