Finance question
Can I use vendor finance to buy a business?
Yes, often. Vendor finance means the seller is paid part of the price later instead of at settlement, and it is common on smaller deals, such as 20 to 40% of the price on accounting practices under $1 million. It can stand in for part of your deposit, but the main lender still has to approve the whole structure, subject to lender assessment.
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The short answer
The seller's confidence becomes part of the security
In vendor finance the seller agrees to take part of the purchase price after settlement, usually as a deferred payment or a loan to you on agreed terms. For you it shrinks the cash needed on day one. For the main lender it does something more useful: a seller who is still owed money has a reason to hand over the customers, the staff and the know-how properly. That is why lenders tend to read vendor finance as a sign the seller believes in the earnings rather than as a warning. The lender still decides how the seller's loan sits beside its own, and what it will fund.
The guides show where vendor money fits. Sub-$1m accounting practices commonly carry 20 to 40% vendor finance, while specialist lenders fund up to 70% of a practice purchase as standard (accounting practice guide). In trades businesses, banks rarely fund more than 50 to 70% of goodwill, deposits run 20 to 30%, and vendor finance commonly bridges the gap (trades business guide).
Larger service businesses lean on earn-outs. A staffed commercial cleaner is usually funded with a 30 to 50% buyer deposit and a loan secured on property, and on larger deals with vendor finance or an earn-out tied to contract retention through the first renewal (cleaning business guide). Rent rolls build a similar idea into the contract: around 80% of the price is paid at settlement and the balance is held for four to six months against landlords who leave (rent roll guide). Ventas is a broker across 40+ lenders, with no upfront fee to you; the lender pays us on settlement.
Do you qualify?
What makes a seller willing and a lender comfortable.
A written agreement
The amount, term and security for the seller's loan set out in the contract.
Earnings that cover both
The business must service the lender and the seller from its own profit.
A lender that accepts it
Lender policy on seller loans differs, so the structure is matched to the right one.
A seller who stays on
A handover period keeps the customers and know-how in the business.
Why sellers and lenders accept it
Less cash up front
The seller's loan reduces what you must find at settlement.
A built-in handover
A seller still owed money has a reason to see the transition through.
A price signal
Lenders read it as the seller's confidence in the earnings.
A worked example
A buyer purchases an accounting practice with $800,000 of recurring fees for $800,000, a dollar for each dollar of fees. A specialist lender funds 70%, or $560,000. The seller carries the other 30%, $240,000, as vendor finance, inside the 20 to 40% that is common on sub-$1m deals. The buyer's cash goes to costs and working capital. Illustrative only.
Common questions
Frequently asked questions
How much of the price can the seller carry?
It varies by deal and by lender. Our guides show 20 to 40% vendor finance as common on accounting practices under $1 million, and vendor finance or an earn-out on larger staffed cleaning and trades deals.
Will a lender accept vendor finance behind its loan?
Often, but policy differs by lender. Some are comfortable when the seller's loan is documented and the business can service both, while others set conditions on how the seller's loan ranks. We match the structure to a lender that accepts it.
Is vendor finance the same as an earn-out?
No. Vendor finance is a fixed part of the price paid later on agreed terms. An earn-out ties part of the price to how the business performs after you take over, such as contract retention through the first renewal.
What should the seller's loan agreement cover?
The amount, the term, whether interest applies, what happens if a payment is missed, and how the loan ranks against your main lender. Have your solicitor draft it and let your lender review it before you sign.