What is the minimum down payment a seller should require?
The down payment the seller requires may be more important to the successful sale of a business than the sales price. The size of the down payment, interest rate and length of re-payment all contribute to a successful sale. Over eighty percent of all businesses sold above $100,000 are sold with one-third or less down with the owner financing the balance. Asking for one-half down will reduce the price by approximately twenty percent. Asking for cash will reduce the price to forty to sixty percent of the one-third down payment price. A buyer is trying to buy as much business as possible for the cash he has available for the down payment. When a seller asks for $200,000 down on a $400,000 value business, the buyer may well keep looking until he can find a $600,000 value business where the owner will accept $200,000 down and finance the balance. High percentage down payments cause buyers to discount offers. The business owner who asks for all cash will generally not succeed in selling the
