Investors considering the purchase of a trucking business for sale may find it difficult to secure the financing necessary to purchase such a business, as banks often have restrictions making such financing difficult. In some situations, when an entrepreneur is buying a trucking business, they find they are able to only get partial financing from local banks. In order to get complete financing at the most favorable rate, buyers often pursue seller financing.
Some investors prefer seller financing as opposed to an outright purchase, as they feel more comfortable purchasing a business that is poised to pay for itself in the long-run. They interpret a business seller’s willingness to accept payments as a sign of the seller’s faith in the viability of the trucking business.
According to the Global Business Exchange, 75% of the sales of small to medium-sized businesses involve seller financing.
Seller financing offers benefits for both sides of a trucking company merger. Buyers are given some peace of mind in knowing that the seller has faith enough in the future success of the company to accept payments over time. They also have less risk should the business fail, as the seller would regain ownership control and ultimate responsibility if the business were to fail.
In addition to expanding the pool of available buyers , sellers can significantly increase the sale price when they choose to offer seller financing for trucking companies as an additional option for securing capital.
Tom West of Business Books Press says that business owners receive an additional 15.8% of their original asking price when they choose to allow seller financing terms, as opposed to all-cash bank-financed sales. The source of the additional profit is the interest from the seller financing. Sellers are advised to talk to their tax professionals about potential tax benefits of offering seller financing.
While offering seller financing certainly doesn’t ensure the success of the business, it does provide the buyer with motivation to work harder to purchase the business more quickly in order to pay less interest. It also provides sellers with motivation to turn over the business in the best condition possible, and to assist the buyer with a smooth and effective transition.
Business sellers are advised to require a down payment of 20 to 30%, while buyers are advised to take their time and to undertake a trucking business valuation prior to committing to purchasing a business, in order to ensure the business is worth the full price to be agreed upon.