Matt and Liz Raad

Vendor Finance: The Easiest Way to Sell Your Business For Maximum Price!

Are you interested in learning about the simplest and easiest no-brainer way of getting maximum sale price when you come to sell your business? –This is a superb business exit strategy that most business sellers dont use or refuse to use and in doing so, do themselves out of hundreds of thousands of dollars and most importantly makes the sale much easier and quicker?

As a seller using vendor finance is an incredibly powerful way to get the maximum sale price for your business, to get that big sales multiple. We have been involved in deals where the simple offer of vendor finance made all the difference between the business sale going through or not going through.

With the challenging bank finance situation these days you the seller will often be in a far better position to finance the business. In this day and age the easiest and most effective way to sell a business quickly is to offer vendor finance and its not as difficult as you think!

What is Business Vendor Finance?

Vendor finance is simply where you the seller (vendor) help finance the buyer into your business, usually by allowing them to pay a lesser amount than the agreed sale price of the business on settlement and then pay off the remainder over a period of time.

I believe it is becoming more and more important for sellers to consider vendor finance and we are now seeing a lot more business deals in Australia that involve some form of vendor finance. Especially in the current environment where the banks have tightened up considerably on small business finance which means that it is increasingly important for vendors to consider vendor finance.

Lets take a look at why this simple strategy is so powerful when it comes to selling your business…

  • Widens pool of potential buyers
  • Shows you have got confidence in the business
  • Easier for them to buy
  • Your competition does not offer it (ie other sellers)
  • It is far more simple than you think

The biggest advantage of offering vendor finance is that you are making your business more affordable to more business buyers ie you are vastly broadening the net of potential business buyers.

To illustrate what we mean lets take a look at this simple exercise we run at our workshops. We will ask a room full of business buyers and business owners the question:

"Who has $1 Million or more to buy a business?" Very few hands will go up.

  • When we ask: "has anyone got a $100,000 to buy a business?" A couple of hands go up
  • "Has anyone got $50,000 to spend on a business?" A few more hands go up
  • "Has anyone got $20,000 to buy a business?" Now more hands are starting to go up
  • "Who's got $10,000 to buy a business?" Now many more hands up in the air
  • "Could someone put $5000 towards buying businesses?" As you can imagine we now have a room full of people with their hands up in the air.

The point of this simple exercise is to show you that as less money is needed to get into a business, there's a lot more buyers suddenly coming in to the market. This is exactly what we are doing with vendor finance -widening the pool of available buyers to vastly increase your chances of selling the business for more money.

Vendor Finance solves the major hurdle when it comes time to sell your business!

Vendor Finance overcomes the main challenge that all your buyers will face -the banks actually lending them the money to buy your business. Keep in mind that there are not a lot of individuals running around with $500,000 ready cash in their hands.

Most buyers will need to borrow money to purchase your business, and many in the current market will not get a loan off the bank. Does this make them a bad candidate for owning or buying your business? Generally No. Are you willing to let this large pool of potential buyers for your business slip by? -The answer should be NO!

Also, keep in mind that when you have more buyers you have more options especially when it comes to negotiating the sale price of your business. Its just simple supply and demand: more business buyers to chose from means you can generally ask for a better price as you have more buyers competing to own your business.

There are many ways to offer vendor finance to a potential buyer of your business. We wouldn't necessarily advertise that vendor finance is available (it depends on the deal/situation), -sometimes it is better to keep it up your sleeve as a negotiation tactic, BUT make sure you are prepared and know your options. Have a plan in place which includes the amount of vendor finance and potential terms and the sort of person you can offer it to.

In our opinion this is a superb business exit strategy that all business sellers should consider. We cant emphasis the value of offering some vendor finance enough.

So when it comes time to sell your business make sure you are prepared and factor in some provision for vendor finance -it will help your business sale be much more successful, and not only more profitable but also quicker and easier!