Glossary
Vendor finance
The seller leaves part of the price in the deal as a loan you repay over time. Common in business sales, and read carefully by lenders.
In plain English
Vendor finance means the seller does not take the whole price at settlement: part of it stays behind as a loan from the vendor, repaid from the business's earnings over an agreed period. It bridges price gaps, and it keeps the vendor invested in a smooth handover.
The terms matter enormously: how much, over how long, at what rate, and crucially whether the vendor's loan ranks behind the bank. Most senior lenders require exactly that, a formal deed putting the vendor last, before they will lend alongside it.
Why a lender cares
Lenders read vendor finance two ways at once. As a signal, it is positive: a vendor confident enough to wait for their money believes the earnings are real. As a commitment, it is another repayment the business must service, so it goes into the debt schedule and gets tested at the assessment rate like everything else. Deals are approved and declined on that arithmetic.
Where this term takes you
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