Seller Financing

One of the most common options to finance a management buyout is for the seller to provide financing (also known as deferred consideration).

Usually, the seller creates a note that is amortized over a period of time.

This option is an advantage for the management buyout team because sellers are usually more willing than banks to provide the funding.

Additionally, as a condition of financing the transaction,  some  lenders may insist that a portion of the sale be financed  by the seller.

This condition provides a measure of confidence to the lenders because it shows that the seller believe that the business will remain a viable concern once the sale is completed.