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4 Surprises About Seller Financing and Limo Business Sales

Last updated on July 10, 2011 by Sozo Staff

Sometimes business owners focus on price and forget about financing. But with credit tight and lenders more risk averse than ever, seller financing has become an increasingly important bargaining tool when listing limousine companies for sale. Sellers who are hesitant to share some small risks with a buyer may be missing out on large rewards.

1. Seller Financing Is the Norm

More than 90 percent of all limousine and charter bus sales include some percentage of seller financing. In fact, it’s often the deciding factor in whether a sale is finalized. In many cases seller financing bridges the gap between a modest bank loan and the sales price, allowing the seller to receive a higher overall purchase price. A seller note may have psychological benefits as well. For the buyer, having the support of the seller can boost confidence that the business will thrive under new ownership.

2. Collateralization Is Negotiable

The idea of being financially associated with a business you no longer have control over can be understandably intimidating. Limo business owners often wonder what will keep a buyer from defaulting. Part of the answer is choosing a qualified and trustworthy buyer; the other part is collateral. Tying the seller note to assets beyond the business – such as the buyer’s house, investment property, or commercial real estate – can make defaulting a lot more painful (and hopefully more avoidable), while providing the seller with a financial reward should the buyer walk away.

3. Notes Can Be Sold

Many business owners are wary of offering financing because they don’t want to remain tied up with the business they had planned to exit. This is where note brokers come in handy. These professionals specialize in identifying parties interested in purchasing a note from a seller. In return for signing over ownership, sellers receive cash value for their note. With the ability to hand off the loan later down the line, note brokerage companies significantly reduce the risk of third party financing.

4. Seller Financing Is About Flexibility

Most of us are used to bank loans with terms that are set in stone. However, seller financing can be far more flexible than traditional financing. Payment schedule, loan period, and even (to some degree) interest rates can be adjusted to satisfy the needs of both parties. As the “bank” in the situation, the seller has the right to investigate the buyer’s financial background and credit. Remember, the best deals happen when both parties have something to gain. With successful seller financing, the buyer will be able to obtain funding for acquiring a limo business that otherwise would have been out of reach. For the seller, financing is an opportunity to close a deal with the most advantageous buyer for the best possible price.

Filed Under: Transportation

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