If you’re a buyer, it’s a good idea to fig­ure out the ball­park of how much you can afford. This will be a com­bi­na­tion of how much you’ll pay from your own sav­ings, bank loans, and other financ­ing meth­ods along with how much cash the busi­ness can con­tribute to pay off the loan. There are a num­ber of ways a buyer can pay for a busi­ness. The buyer can pay with cash, use sav­ings, ask for help from fam­ily and friends, or get a bank loan.

Another option is owner financ­ing where the buyer makes a down pay­ment and signs a promis­sory note to pay the remain­ing amount. The seller secures the loan with cosign­ers on the note, a per­sonal guar­an­tee, first or sec­ond mort­gages on the buyer’s home or other real prop­erty, a secu­rity agree­ment on per­sonal assets, the right to take back the lease, etc. What sort of secu­rity the seller asks for all depends on the buyer’s finan­cial strength. If the buyer defaults on the loan, the seller seizes and sells the secured assets to pay off the loan.