Seller financing

Seller financing changes when the buyer pays the price. Instead of receiving everything at completion, the seller accepts some exposure to the acquired business and buyer after ownership changes. That can reduce the immediate external funding requirement, but the remaining obligation still needs a credible repayment source. Paying later is not the same as paying less.

The collection groups both scheduled deferred consideration and performance-contingent earn-outs under a broad seller-finance label. Distinguish them before modeling cash: a fixed payment may fall due even after a weak year, while a genuine earn-out depends on defined conditions. The reported £1.8m purchase with £1m paid at completion and two £400k later payments illustrates the first mechanism. It is described as an exceptional deal, not standard terms. Watch source Watch source

Establish dates, conditions, interest if any, security and ranking. The source describes a closing package where a subordination deed makes bank debt senior to seller lending. A seller’s contractual payment expectation must therefore be read alongside lender restrictions. Future refinancing may help pay a large balance, but remains a separate financing event with its own uncertainty. The useful negotiation question is whether the schedule remains workable through an ordinary trading setback, rather than whether the seller accepts a small initial cheque. Watch source

Follow the connections

Deferred consideration · Earn-outs · Subordination.

Continue in the course: Structuring the price.