Buying a Business Through Seller Financing

Advertising and publishing veteran Janelle Regotti was looking for a business to buy. The right opportunity presented itself in 2014 when she found Guide Publishing, a company that distributed a quarterly resource guide for Northeast Ohio seniors. The only catch: Regotti didn’t have the $500,000 asking price.

With few physical assets to borrow against, she was unlikely to get a bank loan. So with the help of her business broker, she negotiated a seller-financing deal and bought the business five months later with just 10 percent down and quarterly payments due over 10 years at about 6 percent interest.


Of course, most sellers won’t finance 90 percent of their asking price. But borrowing 10, 20 or even 30 percent from a seller at a competitive rate still beats using your credit card to cover capital shortfalls. If you’re interested in seller financing, here’s what you need to know.

The 7 Business Lessons You Should Learn by 30

Starting a business -- or even getting involved as a professional -- when you’re young can be intimidating. You might have knowledge about business from school, books or practical advice from sources online, but there’s a big difference between understanding business fundamentals on paper and gaining wisdom through actual experience.

By the end of your career, you’ll have accumulated a wealth of knowledge and hundreds of lessons, but there are some lessons that you should learn early on -- ideally before you turn 30.
These lessons are some of the most important to learn while you’re still young enough to make use of them:

The Ins and Outs of Microfinancing Your Small Business

Venture capital may be the hot, sexy funding route that helps a few businesses and grabs a lot of headlines every year. But it turns out another type of funding works out better for most entrepreneurs: microfinance. Microfinance loans are small loans typically in the range of up to $50,000 in the United States, with an average loan amount between $9,000 and $10,000.

Non-bank lenders such as Accion USA provide loans that average just $7,000. Here’s the funny part: The businesses they lend to have a survival rate that’s twice the national average. Repayment rates are on par with traditional banks, too.

Why do micro-borrowers do better than owners who use traditional bank loans or credit cards? Here are three reasons:

1. Better vetting. Microlenders tend to spend more time getting to know a business owner one-on-one, which usually doesn’t hap­pen at major banks. These microlending institutions often take bigger risks on unproven startups, but because they take the time to learn a lot about the person seeking the loan, they form a more personal connection. With those closer ties having been forged, entrepreneurs will go the extra mile to avoid disappointing the person who approved their loan.

2. Support groups. Most microloans are made in a group setting. The business owners in a lending circle support one another and, in some cases, are financially responsible for each other’s loans. This web of interconnected responsibility helps keep them on track and provides moral support.

3. Smaller loans. When entrepreneurs only have a small sum with which to start their businesses, they watch every dime carefully. Too often, landing a big loan can lead to profligate spending rather than growth and productivity. Small borrowers also don’t get delusions of global domination -- they take it one careful step at a time, so they don’t stumble into overexpansion.