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Your Options When the Buyer of Your Business Stops Making Payments

Published on December 20th, 2019

Real Estate Lawyer

Let’s say you recently sold your business with seller financing. You receive payments on a monthly basis until the buyer has fully compensated you for the value of the business you sold. Unfortunately, after a few months, the buyer stops making payments. What are your options in this situation? What can you do to get what you are owed? This guide will answer these questions.

Your Options

Obviously, the first thing you should do is meet with the new owner of the business. Figure out why the payments have stopped and when they will resume. This guide will assume that you have already done it and now need to consider options to enforce payment.

Unfortunately, there really is only one reasonable option for a seller in this situation and that option is a lawsuit. By filing a lawsuit, you can get the courts to force the buyer to make the payments. There are a few things you can do to make your lawsuit more effective. Consider what the future consequences will be if the payments stop once again. You can come to an agreement that includes these consequences. For example, your agreement can include automatic judgments for any future lawsuits you have to file for defaulted payments.

Another option that may or may not be appealing to you is to reclaim the business you sold. If the buyer is missing payments due to the business not performing well, getting the failing business back may not be a nice thought. However, the business has value and you can reclaim the value of the business to make up for the payments the buyer failed to make.

Notes About Seller Financing

  • Selling with financing is risky and you should try to avoid it if it is at all possible.
  • Never sell a business to anyone who you do not have confidence in.
  • If you have to sell with financing, consider just keeping your business instead. You are receiving monthly income from the business, which is the same situation you will be in when receiving payments from the buyer.
  • You can sometimes include consequences for missed payments in the original agreement when you sell the business.
  • Pay attention to how the business does after selling it. If it is prospering and you are still not receiving payments, then there is no excuse for the new owner.

One of the very first things you should do when payments start coming in late is speak with a business lawyer in Melbourne, FL. Learn what your options are as early as possible.

 


 

Thanks to The Law Offices of Arcadier, Biggie & Wood for their insight into business law and when a buyer stops making payments.

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