The seller’s credit: for whom, and how?
When a business or property is struggling to find a buyer, the seller credit is a solution. It is the seller who gives direct credit to the buyer, without going through a bank.
The seller credit, a solution to take over a business or real estate.
Banks are becoming less popular. Their role in the various financial crises of the turn of the century did not work in their favor, and led to a protest movement, or at least a desire to test alternatives to conventional banking. Bank credit, the very symbol of financial services, has seen a kind of non-formal competition: credit between individuals. We will approach a special form of this type of loan without a bank intermediary, the ” seller credit “.
Bank credit for companies
- Financial aid, often granted for the purpose of helping to create jobs.
- The loan of honor (article MarKet): as the name suggests, these are loans that rely solely on the skills and good faith of the applicant. We do not ask for financial guarantees.
- The seller’s credit, our subject here: the seller is asked directly for “payment facilities”. The seller credit as a financing solution of a business recovery is the most common form of this particular type of loan.
No financing solution is exclusive: in addition to its savings, one can very well apply for a loan at the bank, and supplement its financing with a seller’s credit, for example, to buy the desired business.
Deposit of the seller’s credit
The seller, to guarantee the loan he gives to the buyer of his company, can ask for guarantees. Someone can then vouch for the buyer, who will have to take care of finding a person to support him. Let’s make it simple: a young business buyer will ask his parents to be his guarantors. He can also guarantee his loan with a mortgage or pledge or pledge with personal property or even part of the business he buys.
Benefits of a seller’s credit
- For the buyer : if he has obtained a credit from the seller, this is a serious pledge of confidence given to him by the seller. This pledge is very useful when applying for a loan to the bank, which is reassured as to the skills of the buyer. In addition, bank credit would be smaller. Very advantageous if the interest rate granted by the seller is smaller than that of the bank. Let’s not even talk about the trust of the former owner in the eyes of suppliers or employees of the company!
- For the seller : besides the fact that he finds a “good buyer” who will perpetuate his old business, he can also sell at a higher price. It is easier to pay 100,000 euros in three years than 90,000 euros in one go. He may also pay the capital gains of the assignment as he receives the settlements of the purchaser, knowing however that if the buyer is part of the family unit of the seller, the latter is exonerated of tax on the capital gain on sale.
Difficulty obtaining a mortgage
The buyer, being unable to obtain a mortgage, can offer the seller to sell the property with a portion of the amount in seller credit. It is difficult to find a seller who accepts, unless the seller can not sell or is a person who knows the buyer well.
The real estate purchase can therefore have several sources of financing. In addition to the personal contribution (savings, savings) or bank credit, you can use a credit granted by the seller himself. The seller credit is flexible, it is the two parties who agree on its terms.
An example: the seller asks 200 000 euros for his apartment. The buyer only has 50,000 euros of contribution and 100,000 euros of bank credit. One can very well imagine that the seller of the apartment grants a seller credit of 50 000 euros, saying that it is better to take this risk rather than lower the price of his apartment to, for example 170 000 euros.
The seller credit between individuals for real estate is a realistic possibility. If the buyer brings strong guarantees, why would the seller refuse a loan, even in the long run? Unlike the seller’s credit for the business takeover where it is not usual, the seller can here make a loan with interest rates, as long as it is below the rate of wear, and have, in addition to the amount of the sale, the interest money, the profit that a bank would have had in its place.
In our increasingly challenging world of banks, it may not be a bad choice to do without a banking institution, even for the sale of real estate. It’s good for the seller, who pockets the interest and sells his property at a fair price and it’s good for the buyer, who gets a payment facility, and probably a lower interest rate than what he would have had in a bank.
Seller’s credit: when the seller himself grants the credit to the buyer.
The seller credit makes it possible to supplement savings and bank credit advantageously when taking over a business. It is above all a story of people, where everything is based on the seller’s trust in the borrower, who agrees to pay on credit the company he takes over.
We often find the seller’s credit in business transfers, often family business, where the buyer practices the same business as the seller. The young buyer rarely has the necessary funds to buy the business without the help of the seller. When it comes to buying a house, we are talking about a real estate seller’s credit, which is based on the same confidence that can be had in a life annuity: it is fundamental to use a notary and secure the property. maximum this type of loan between individuals.