NEW YORK (AP) — If you need financing to buy a small business, there's a good chance you'll have to get it from the seller.
In a survey of 260 business brokers by BizBuySell.com, one-third said that nearly all sales of small businesses they saw included financing by the seller. And 35.5 percent said that most of the deals — between 60 percent and 89 percent — included financing by the seller. Business brokers are intermediaries between buyers and sellers when a business is sold.
BizBuySell.com is a website where prospective buyers can search for businesses that are being sold, much like a real estate website.
Ongoing difficulty in getting bank financing is a primary reason why sellers are pitching in. Nearly 70 percent of the brokers surveyed said the availability of financing from lenders has not improved since 2011. More than half — 55 percent — said the problem is the more stringent lending policies at banks.
In such a tight lending environment, "business owners starting to plan their exit strategy should expect that seller financing will be a required part of the sale," said Curtis Kroeker, general manager of BizBuySell.com. He noted that some deals aren't getting done. And BizBuySell.com noted that the number of business sales has not yet returned to pre-recession levels.
Nearly 92 percent of the brokers don't expect financing to become easier this year. Two-thirds said uncertainty about the presidential election will hamper lending.
Looking to the future, the majority of brokers were pessimistic about when sales would return to the levels seen before the recession began in December 2007. Forty percent said it would take more than two years for sales to return to those levels, while about 39 percent said the sales climate would be fully recovered within two years. Another 14 percent said sales would never return to those levels.
The survey was conducted online in August. The brokers questioned are all part of BizBuySell's broker network.