Nearly eight times more US business buyers expect to use seller financing than prospective UK purchasers, according to a BusinessesForSale.com survey of hundreds of buyers, sellers and brokers.
Asked how they expected to fund a purchase, nearly one in three (31%) US-based would-be buyers said they hoped to obtain a loan from the vendor, compared to fewer than one in 20 (4%) of their counterparts across the Atlantic. At 15%, the worldwide average was also much lower.
Buyers in the US market clearly expect sellers to be rather more accommodating over deal structure. That seller finance, which burdens the seller with the risk of not recouping the entire sale price, should be common in a nation renowned for its entrepreneurial culture and all that entails – namely embracing risk and tolerating failure – is unsurprising.
A failure to conjure cash, brokers will know, lies at the root of many failed business sales. A refusal to consider deferring part of the consideration and other forms of inflexibility – such as staying on post-sale and a willingness to lower the price – hampers a significant portion of business sales, according to 58% of business brokers.
Bridging the gap between what risk-averse banks are willing to fund and what sellers expect to recoup, it’s also no surprise that most brokers report that vendor finance has become more extensively used since 2007. In a 2012 survey by BusinessesForSale.com, 37% agreed to some extent and 29% strongly agreed that owner finance was more common since the subprime crisis that triggered a global slowdown, while only 5% disagreed to some extent and 6% strongly disagreed. The other 23% identified no discernable change over the five-year period. Read the full article on the BusinessBroker.com
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