VENDOR TERMS – One method of achieving a better sale for both Buyer and Seller.
“Where the vendor leaves a percentage of the purchase price as a loan to the purchaser” In the next five years, vendors placing their business on the market are going to have to give some consideration to providing some vendor terms as part of the buyers financing package. This will quite possibly form part of the marketing strategy to obtain the maximum value for the business, particularly if the business has significant goodwill (non-tangible asset) content. The difference between what the bank will value and lend against a business, as opposed to the current market value, is widening – and purchasers will look for assistance from the business owner to help them to purchase the business. This practice is common place in the USA, South Africa and the UK and is viewed as ‘vendor confidence’ in the business which is being sold. This method of financing a buyer into the sale has been a very popular development overseas – and it is only a matter of time before it becomes widely utilised here today. The alternative, with many baby boomers contemplating the sale of their business as they enter retirement, is potentially lower business values, as purchasers calculate what the traditional lenders will lend and the gap between that and the asking price of the business. Ask us about using “vendor terms” to help sell your business faster, and for the best possible price.