Seller Financing Rates

October 29, 2024

by a professional from Miami University of Ohio in Denver, CO, USA

Curious to hear what rates people are negotiating on seller financing. I'm currently negotiating a 10% seller note, with a two year full set aside, 10 year amort, 5 year balloon. Seller proposed 8% interest rate which I countered at 5%, Seller came back at 7%.

Thank you!

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Reply by a searcher
from Glasgow Caledonian University in Glasgow, UK

If you can cover the debt service and its what you need to do to get a deal done. I would take the seller's financing @ 7% over any other means of finance all day long.

Reply by a professional
in Crystal Bay, NV, USA

Thanks Luke, As John mentioned above, there is no normal. In our experience at ZimpleMoney there are different rational for interest rates. If the #sellernote is to help pay a higher price, the interest rate could be a little less. If the sales price is lower than the seller would like, maybe they'd want a little higher interest rate. It the business is fairly priced, then the market interest rate may prevail. The term will come into play as well. If yo are tying up many for 12 months vs 72 months. I would also want to know if there is collateral and if the note is in a first or second position behind any other lenders. Is there a personal guarantee involved. All these things factor into an interest rate. As the seller, you want to make sure the buyer has the cash flow to make the payments. I think the 10year t-bill is a good start point and then add for risk, term, price, cash flow, collateral, etc. We are seeing the equivelent of 7% to 20% in our clients portfolios. ‌

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