Seller Financing Explained! скачать в хорошем качестве

Seller Financing Explained!

Top Risks in Seller Financing: Buyer Default on Payments Risk: Buyer stops paying after closing. Avoid by: Structure a promissory note with clear payment terms, late penalties, and default clauses. Secure the note with a UCC-1 lien on business assets or a personal guarantee. Buyer Mismanages the Business Risk: Buyer runs the business poorly, hurting its value or defaulting due to cash flow issues. Avoid by: Require the buyer to provide monthly or quarterly financials. Consider training/support periods post-closing. Maintain operational covenants like “must retain key staff” or “no major capital expenses without approval.” Subsequent Liens & Creditors Risk: Buyer takes out loans or buys equipment, leading to senior liens. Avoid by: File a UCC lien immediately upon closing to secure your interest in the assets. Consider adding language restricting additional debt without your written approval. Legal/Collection Challenges Risk: Costly and lengthy process if the buyer defaults. Avoid by: Include a confession of judgment clause (if legal in your state). Specify jurisdiction and dispute resolution terms in your favor. Use a business attorney to draft airtight agreements. Loss of Collateral Value Risk: Assets pledged as collateral may depreciate or disappear. Avoid by: Get a current asset list and assign proper values. Add language to maintain or insure key equipment/assets. Periodically audit or check inventory/assets. IRS or Tax Liabilities Risk: Buyer fails to pay taxes (payroll, sales, income), and the IRS comes after the business. Avoid by: Include in the agreement that the buyer must stay compliant with state and federal taxes. Consider a holdback escrow for any potential tax liabilities. Repossessing a Failing Business Risk: If the buyer defaults, you may get stuck with a distressed business full of liabilities. Avoid by: Have clear repossession/reversion rights in the event of default. Include indemnity clauses protecting the seller from liabilities created by the buyer. Sanjay Wadhwani PA - KMF Business Advisors Seller Financing Explained! Non-Compete & Reputation Damage Risk: Buyer ruins your brand or customer base. Avoid by: Include brand use guidelines and non-compete/non-disparagement clauses. Retain some consulting control if necessary. ✅ Best Practices to Protect Yourself: ✔️ Hire a Business Attorney to draft and review all legal documents. ✔️ Use a Collateral Agreement with a UCC filing. ✔️ Demand a Personal Guarantee from the buyer. ✔️ Vet the Buyer — get personal financials, background checks, and references. ✔️ Include Acceleration Clauses — if one payment is missed, entire balance becomes due. ✔️ Require Insurance Policies naming you as a loss-payee. ✔️ Request Down Payment of at least 30% to ensure the buyer has “skin in the game.”