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  • Writer's pictureTORRO Group

How can sellers protect themselves when accepting an offer with 'seller financing'?



There are many ways a seller can take to protect themselves when offering seller financing for the sale of their business


Use a promissory note


A promissory note is a legally binding document that outlines the terms of the loan, including the repayment schedule and interest rate. This can help protect the seller by clearly establishing the terms of the loan and establishing a record of the loan.


Get a personal guarantee


A personal guarantee requires the buyer to personally assume responsibility for the debt if the business is unfit to pay it back. This can provide additional protection for the seller in the event that the business isn't successful.


Secure the loan with collateral


The seller can ask the buyer to provide collateral to secure the loan. This can include assets such as real estate or equipment. However, the seller can seize the collateral to help recoup their losses, If the buyer defaults on the loan.


Consider using a third-party lender


Rather than providing seller financing directly, the seller could work with a third-party lender to provide financing to the buyer. This can help reduce the seller's risk and ensure that they aren't on the hook for the entire loan if the buyer defaults.


Get legal advice


It's a good idea to consult with a lawyer or other legal professional when structuring a seller-financed deal. They can help ensure that the seller's interests are protected and that the terms of the loan are fair and reasonable.




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