And what actually happens if the buyer stops paying — answered plainly, from someone who has been on both sides of a deal.
If part of your sale price is paid over time, there's one question that matters more than any other: what happens if the buyer stops paying?
It's the right question to ask. I'd ask it too. Most people offering to buy your business with vendor finance won't give you a straight answer, because the honest one takes a bit of explaining. So here it is, plainly.
Vendor finance — sometimes called seller finance — simply means you agree to receive part of the price in instalments rather than all of it on day one. Done properly, it's not a risk you carry alone and hope for the best. It's a structured arrangement with real security behind it, written down, legally binding, and built so that you're protected if things don't go to plan.
Let me show you how.
Say we agree a price for your business. A portion is paid up front on completion. The rest is paid to you in agreed instalments over a set period — usually two to five years — out of the profits of the business you've built.
You know that business better than anyone. You already know it can service those payments, because it's been paying you for years. That's the whole point: the business funds its own purchase, which is exactly why a deal can complete when a bank won't lend and a cash buyer can't be found.
But "the business will pay for it" isn't good enough on its own. You need protection in writing. That's where the security comes in.
None of this is a handshake. Every deal I do is documented by solicitors, and your protection sits on three pillars.
This is the big one. A charge is registered against the company — much like a mortgage sits against a house. If the payments aren't made, that charge gives you a legal claim over the assets ahead of most other parties. You're not an ordinary creditor waiting at the back of the queue. You're secured.
Depending on how the deal is structured, ownership — or the shares themselves — can be held back or held in trust until the final payment is made. Put simply, it isn't fully yours to lose and fully theirs to keep until the money is actually in your account.
Every amount, every date, the security, and the remedies if a payment is missed — all of it set out in a loan note and sale agreement drawn up by solicitors. No vague promises. If it isn't written down, it doesn't count, and I wouldn't expect you to accept it any other way.
This is the part people gloss over. I won't.
First, a missed payment isn't the end of the world, and it doesn't mean you've lost your money. It triggers a clear process — one that's already written into the agreement before anyone signs.
There's usually a short cure period. Business has its ups and downs, and a genuine one-off hiccup gets a fair chance to be put right. If it's a real problem rather than a bad month, we talk. I'd far rather sort a wobble early than let it become a crisis — and a well-run business is worth protecting, not asset-stripping.
If payments genuinely stop, your security is what you fall back on. The legal charge lets you take action over the assets. In the right structure, control of the business can revert to you. You end up back in a position to recover your value — because that's precisely what the paperwork was built to do.
That's the difference between vendor finance done properly and a promise scribbled on the back of an envelope. One protects you. The other doesn't.
I'm not a broker taking a fee and disappearing. I'm the buyer, and I've spent years buying and running SME businesses using these exact structures. I've built businesses, run them, and sold them. I know what it feels like to hand over something you've spent your life on, and I know what a seller needs to feel safe doing it.
So I don't cut corners on the protection, because a deal that isn't safe for you isn't a deal I want either. If you're ever left exposed, I've done my job badly — and I don't intend to.