Introduction
When buying a business, should you rely on an acquisition loan or negotiate seller financing? Both options have advantages — and the right choice depends on your deal. At Yaw Capital, we frequently combine these tools to maximize success for our clients.
What Is Seller Financing?
The seller agrees to finance part of the purchase price, often 10–30%. The buyer pays the seller back over time, usually with interest.
Pros:
- Easier approval for buyers with limited capital.
- Demonstrates seller confidence in the business.
- Can reduce upfront cash requirements.
Cons:
- Seller may want higher overall pricing.
- Adds complexity to negotiations.
Acquisition Loans (SBA & Bank)
- SBA 7(a): Up to $5M with favorable terms.
- Bank Loans: Larger sizes but stricter requirements.
Pros:
- Clear structure, predictable repayment terms.
- Ability to finance larger deals.
Cons:
- Requires strong documentation and creditworthiness.
Hybrid Structures
The most powerful strategy often involves both seller financing and acquisition loans. For example:
- SBA loan covers 70%
- Seller financing covers 20%
- Buyer equity covers 10%
Conclusion
Neither approach is inherently better — the right structure depends on deal size, risk profile, and negotiation leverage. Yaw Capital helps buyers find the balance that gets deals approved and closed.
