What To Do If the Person You Sold Your Business to Defaults on the Payments

Business Litigation Lawyer

When an interested party purchases your business, it is rare for the buyer to have enough cash to cover the full cost of the business. Most buyers will use financing from a bank or private lenders. However, it may be more difficult for a person to receive a loan from a private lender in some cases. As a business litigation lawyer in Washington, D.C. from a firm like Brown Kiely, LLP can explain, buying a business can cost a lot of money, so some buyers will want to enter into a seller financing agreement.

If you sold your business and allowed the buyer to enter into a payment plan, what can you do if he or she stops making payments?

What Does Your Contract Say?

When you sell your business, you should always have a lawyer to help draft the contract and make any necessary reviews of a contract. This will ensure that you create the contract in your best interests. The lawyer can also make sure that the buyer’s financial situation allows him or her to purchase your business and make the payments. Your contract should have a payment schedule, loan period and interest rate. You should also include what will happen if the seller defaults on his or her payments.

What Collateral Do You Have?

When you sell your business utilizing seller financing, then you should still have collateral in the deal. The collateral is typically your business and its assets. If the buyer defaults on the loan, then you can reclaim your business. There are legal costs associated with reclaiming your business, but you can recoup some of your losses if you plan to sell the company again. It is better to pay to reclaim the business than to lose it entirely.

Do You Have a Lawyer?

If the buyer defaults on his or her payments, you should consult with a lawyer as soon as possible. He or she can guide you through your options to ensure that you do not lose any more money than you have to. Even with vetting, you cannot always determine if someone will be able to make payments. If someone has a financial hardship, he or she may default.

Selling your business can be beneficial. However, if you allow someone to make payments, there is a risk that the buyer will default on the payments. It’s important to make sure that the business is collateral so that you can get your business back if the buyer defaults. If you are worried about a buyer defaulting, contact a business lawyer as soon as possible.