Donna Genie explains seller financing as an alternative to bank loans, which currently run 10-12% for SBA loans. The seller acts as lender and receives monthly payments, but should take collateral beyond the business, get personal guarantees, and plan for default or closure.
About 10 to 12%.
The idea of selling your business is a big deal, and you need to look at a lot of considerations. One of the current problems in selling is that interest rates are so high it makes it difficult for a buyer to get financing. SBA loan interest rates are running about 10 to 12% currently, so many people choose to look at seller financing. In seller financing, basically you become the bank. So each month when the payment is due, that buyer of the business would actually be paying you instead of the bank. Now, in seller financing, I highly recommend that you get collateral, the collateral being more than just the business. And you'll have a personal guarantee so that you could go after them if they default. So if they default, what happens if they stop making payments? What happens if they close the business? What happens if they destroy the business? These are all considerations on your worst case scenario to consider.
