Creative Financing in Business Transactions: A Case of Vendor Financing and Credit Cards

Let me share a unique story from the world of small business deals that highlights the power of creative financing. https://www.youtube.com/watch?v=sVvFbqAv3bg

The Deal

A retail store was on the market for $150,000, but after negotiations, the buyer and seller agreed on $130,000. The terms were that $100,000 would be paid on closing day, with the remaining $30,000 to be paid over time using vendor financing.

The Twist

On the day of closing, the seller had $55,000 in payables. Instead of the seller settling her outstanding debts, the buyer made an unusual request: he asked her to bring all those payables to the closing table.

The Credit Card Move

Just before finalizing the deal, the buyer sat down with the seller, took out his credit card, and paid off the $55,000 worth of payables directly to the suppliers. This meant that when the transaction closed, the buyer only had to pay an additional $45,000—effectively putting $55,000 of the purchase price on his credit card.

The Outcome

From the seller's perspective, nothing changed. It was an asset sale, and she kept the cash along with her receivables and payables. For the buyer, however, not only did he complete the deal, but he also earned enough airline points for a business-class flight to California!

This story perfectly illustrates how thinking outside the box can make business transactions more flexible and even rewarding.

Key Takeaway:

Creative financing, such as vendor financing and the use of credit cards, can offer unique advantages in business deals. Entrepreneurs should be open to exploring unconventional methods to achieve favorable terms and optimize financial outcomes.

Cheers,

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