Often when selling your business or your commercial real estate, one of the challenges is the ability of a buyer to obtain financing to fund the acquisition. Perhaps the buyer is coming up cash short or traditional bank financing is unable to cover the full asking price and the required LTV (loan-to-value) ratio.

This situation can happen quite often, but it does not mean all is lost or that as the seller, you need to drop your asking price.

In a recent business acquisition that I was brokering, the buyer was submitting offers about 15-20% lower than what we had determined the value of the business and the assets to be. In order to bridge that gap, we successfully negotiated a structure in which the seller held a promissory note for about 20% of the total asking value with the agreement that he would receive annual interest only payments over the next few years followed by a balloon payment of the full seller note amount.

It is true there was some risk to the seller, but in exchange for that risk, he was able to receive 80% of his asking price up front, charge a premium interest rate and receive payments and the remaining amount at a future date.

The deal turned out to be a win-win for both parties on a transaction that would otherwise not have closed without the seller willing to take on some of the risk.

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