Your business broker San Diego may recommend that you offer seller financing. This is an option in which you allow the buyer to make payments over a set period of time often 3, 5 or 7 years. But what makes this a great idea? In this post we will be looking at the main reasons why offering seller financing is a great idea.
Reduce marketing times
When a business doesn’t sell for long, the next best step is to change the terms and also reduce the selling price. Rather than reduce the price, business brokers San Diego recommend that you offer financing to buyers. This is where seller financing comes in. When financing is offered to buyers by the seller, more buyers will be interested in your business. This is because the buyer will not only pay a small down payment but also take advantage of favorable repayment terms and also the fact that the business owner will continue to have vested interests in the business that is being sold.
Attract more buyers
The more buyers you attract the more competition there will be and the better the bargain you will get when selling your business. Buyers understand the benefits of seller financing. When you offer this option, you will increase the marketability with a wider group of available purchasers. Another reason why you get more buyers is because about 40% of the American population is not able to quality for the traditional bank financing. Seller financing makes them eligible. Seller financing thus widens the market of prospective buyers remarkably.
Reduce closing times
Closing often involves third-party conventional lenders. This can take up to 8 weeks thus delaying closing. With seller financing, you can close within 3 weeks. This is because there are less paperwork as well as a less restrictive due diligence process.
Strategy for hard to finance businesses
If your business is hard to sell, your business broker San Diego can recommend seller financing. There are certain businesses that face financing difficulties. This is more so if a business has not been doing well. Offering seller financing helps bypass conventional loans and attracts more buyers.
The grand beauty of offering seller financing is that you will benefit from interest income. Once the down payment has been paid, you will continue earning regular income from the sale. You will get a higher return since you will not only defer income tax but also continue earning the interest. Typical interest rates are between 4% and 7%. What is more is that since you will not be getting paid a huge lump sum of the money, you will avoid falling into a higher tax bracket.
There are numerous benefits that come with seller financing. Your business broker will help negotiate the best terms and help you know if seller financing is a great option for your business or not.