Definition
With vendor finance, the person selling a business or asset agrees to receive some of the price in instalments after settlement rather than all at once. The seller effectively becomes a lender for that portion, usually under a written agreement with agreed repayments, security and default terms. It can bridge the gap between what a lender will fund and the full purchase price.
Vendor finance turns part of a purchase price into a debt owed to the seller. It is common in small business sales where the buyer has a deposit and some bank or non-bank finance but not the full amount.
How it is usually structured
The buyer pays most of the price at settlement and the balance over an agreed period. The seller may take security, such as a registered interest over business assets on the PPSR or a guarantee from the buyer. If a lender also funds the deal, the vendor’s security usually sits behind the lender’s.
Benefits and risks
For buyers, vendor finance reduces the upfront cash needed and keeps the seller invested in a smooth handover. For sellers, it carries the risk that the buyer cannot pay. Disputes often arise when the business underperforms after sale, so clear terms matter.
Questions to settle
Agree the amount, term, repayments, any interest, security, default process and whether early repayment is allowed. Get independent legal and accounting advice. business.gov.au has broader guidance on buying a business.
To explore finance for the rest of the price, make one enquiry.
Common questions
Why would a seller offer vendor finance?
It can widen the pool of buyers, support a higher price and show confidence that the business will keep performing.
Does a lender allow vendor finance alongside its loan?
Often, but the lender will usually want its security to rank first and may need to approve the vendor's terms.
Should a solicitor draft the vendor terms?
Yes. A written agreement covering repayments, security, defaults and what happens if the business underperforms protects both sides.
Sources and further reading