Selling Your Small Business on a Note

Small businesses often deal with seller financing. Seller financing can be beneficial in increasing the number of buyers, increasing the likely purchase price, easing transition issues, and relaying that you’re confident the new business will succeed under new ownership.

Forbes suggests nine tips to minimize your risk when you’re selling the business on a note:

1. Get cash up front to satisfy a large portion of the price.

2. Consider whether the buyer has the skills and temperament necessary to succeed.

3. Run a credit check on potential buyer.

4. Inquire whether buyer has assets to secure the loan.

5. Set up loan covenants so that you can step in early if the business is not doing as well as you had hoped.

6. Demand regular audits to make sure that the buyer is running the business honestly.

7. Keep tabs on customers to ensure that they are not unhappy, or cutting back on orders.

8. Have a plan for taking back the business if you need to step in.

9. Do not just turn your back on the business, hoping for the best unless you can afford to walk away from the balance on the loan.

See Bill Conerly, Selling a Business on a Note: 9 Tips for Success, Forbes, Mar. 27, 2012. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.