Terms and conditions of a good payday loan
In a trade sale of a smaller business in particular, the seller’s willingness to lend the purchaser part of the purchase price can be an extremely useful way to ensure that the seller achieves the price he is looking for. Owners often do not adopt this strategy, largely because they are concerned about not getting paid, or because they need the full proceeds of the sale for some other business purpose, or to retire.
Vendor finance can be particularly useful where the potential buyer shows strong interest in the business and says he would pay the full asking price if he could raise the money, but is short by a specified amount (say £100 000). If the seller does not urgently require the cash, there is a strong argument for considering offering these terms.
In most MBOs, funding is a central issue. Even where MBOs are supported by outside investors (as most of them are) it is my experience that the amount that can be borrowed from banks and financial institutions often falls short of what is required to complete the purchase. Again, the willingness of the vendor to provide funds on terms could be the difference between a deal being completed or not.