Owner Financing in Today's Lending Environment

As most are aware, trying to get a loan with the current climate of the economy can be extremely difficult at best. Sure if you aren't trying to get financing this probably doesn't affect you, but if you are trying to sell your ecommerce business, it might become more relevant. The immediate question would be if you are trying to sell your site, why should you care about today's lending environment? The answer is fairly simple: if buyers are having trouble obtaining financing for business acquisitions, many business owners are finding themselves assuming the role of the lender. Over the past 12 months, there have been very few all cash deals that we have seen as online business brokers and we know that is primarily attributed to the cutback in lending seen across the country. To help combat this, we almost always advise our clients to be open to some portion of owner financing because it generally is a win-win for all parties involved. On one hand, financing a small portion of the deal instills a real sense of confidence in the buyer that the owner is confident in the company's future success and is essentially willing to back this by trusting the buyer with a promissory note. On the other hand, the promissory note is usually secured by the assets of the business protecting the seller in the sense that if the buyer defaults on the payments, the business will ultimately revert back to the seller. While there are risks with any business transaction, being open to owner financing shows the buyer that you are willing to share some of the risk in the transaction. In addition, the transactions that do materialize are often because the buyer and seller form a friendly relationship during the sale process as they usually work together during the initial training period, further reducing the risk of default.