Is selling a business with owner financing and collateral worth the trouble it may bring?
Question Details: I'm getting ready to list my company for sale. I'm not sure if I want to offer owner financing with collateral as an option. It's just a small lawn service. Also, I'm wondering what kind of cost would be involved and drawing that up if that is an option I decide on?
No, it's not worth it. If the buyer doesn't pay, you'd have to sue him for the money--but collecting can be difficult if he hides his assets or is insolvent--or to get the business back-- but if he ruined the business while he ran it, it won't be worth anything--or to get the collateral--but if he in the meantime sold, hid, damaged, etc. the collateral, or there is some other lien (e.g. a UCC lien) on it, you won't effectively get the value of the collateral. In short, there are two many ways for it go wrong, leaving you holding the bag.