Most entrepreneurs have no idea how seller financing works
Let me break down exactly how seller financing works.
Start by crossing out the word “BANK” and writing “SELLER”.
In a traditional bank deal, buying a business:
- Bank lends 80% paid directly to the seller
- You pay the seller a 20% down payment
- You make monthly payments to the bank
- You personally guarantee the loan
The bank can take your business and personal assets if you don’t pay.
With seller financing, the seller becomes the bank
- You still pay a down payment directly to the seller
- You make monthly payments to the seller
- You personally guarantee the loan
- Seller gets the same legal protections
That’s it. Simple but powerful.
The beauty is in the flexibility.
With a bank, your terms are fixed. With a seller, everything is negotiable: Interest rate, down payment, term, penalties, fees, guarantees.
I bought an underperforming shop that did only $600k in sales, making zero profit.
No bank would touch it.
We put down $25k with the seller financing the rest ($100k) over 4 years at 6% interest.
We increased the sales from $700k → $800k → $900k —> $1M+ this year
It’s been slower growth then we’d like BUT the store has zero debt now and has generated $400k+ of cash flow in 5 years.
Not a bad return on a $25k cash investment.
The seller was happy too.
They got a “loser” store off their shoulders and a consistent monthly payment for 4 years.
For the seller, it solves specific problems:
- They defer capital gains taxes
- They receive monthly passive income
- They get a higher total purchase price than with all-cash deals
Seller financing works best inside a franchise system.
Franchisee selling to franchisee. Why?
The seller must trust that the buyer will pay them back. No seller wants to chase down a buyer, especially the older ones who are now retired.
We put down $50k on a $2M multi-store acquisition. Crazy right?
I’ve known that seller for almost 15 years and he knows that I’m good for it.
Outsiders can’t establish these relationships with sellers. You need to get into the system with a new location or a non-seller financed deal.
From there, you can easily build relationships and trust with other franchisees.
I’m building a complete workshop on how to negotiate & structure seller financing.
What else do you want to learn about seller financing? [Reply here]
Cheers!
Brian
P.S. Do you want my help finding your first (or next) franchise?
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