Vendor Finance Agreements: What You Need To Know

If you’re about to sell or buy a business, that’s great!

However, entering into a business transaction can be a significant commitment.

In some situations, the vendor might agree to lend all or part of the purchase price to the purchaser.

To formalise this arrangement, you need a Vendor Finance Agreement.

What Is A Vendor Finance Agreement?

This contract is essentially an agreement between a vendor and a purchaser, where the vendor agrees to lend all or part of the purchase price to the buyer.

It’s typically used when the buyer does not have the full funds available to complete the business purchase outright.

In this case, the vendor might agree to loan all or part of the purchase price to the buyer for a set period, and with an agreed interest rate.

What Is Included In A Vendor Finance Agreement?

The most common terms we’ve seen in a Vendor Finance Agreement include:

• Payment schedule
• Interest rate
• Consequences of default
• Rights upon insolvency of the business
• Liability protection

However, each transaction is unique! As such, it’s crucial to consult with a legal professional to understand exactly how to safeguard your interests and have a contract customised to your specific circumstances.

Need Help?

If you need assistance drafting a Vendor Finance Agreement, we’re here to help!

You can reach us on 0800 002 184 or at [email protected] for a free, no-obligations chat about your situation.

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