What You Can Do if a Buyer Defaults on Payments After Buying Your Business

January 21, 2020 | Uncategorized | By Personal Injury Legal Directory | 0 Comments

No one who has sold a business ever wants to do it with seller financing. Seller financing is when the buyer of the business pays the seller monthly payments until they have paid for the entire value of the business. This leaves the seller with a large amount of risk, and receiving monthly payments is always worse than receiving a sum of money upfront. However, sometimes it is necessary to include seller financing to attract buyers. If you find yourself in this situation, and the buyer has started defaulting on the payments, what should you do? This guide will answer this question.

First Steps

Obviously, the very first thing you should do is speak with the buyer. There may be a reasonable explanation or a simple solution. Get his or her side of the story and try to work it out amicably. However, if the buyer does not return your calls or continuously misses payments, you should take action. Do not wait too long, or you may not be able to receive what is rightfully yours.

Early on after payments start being missed, you should research how the business is doing. This will give you more information. If the business is failing, you need to act fast before it is worthless and the new owner cannot pay you anything. If the business is succeeding, then there may be something malicious or illegal going on behind the scenes. In this situation, the buyer has no excuse for missing your payments.

The Seller’s Options

  • Your contract should have included some consequence for missed payments. For example, it might state that ownership reverts to you if a certain amount of time passes without a payment. If this is the case, you should invoke whatever rights the contract grants you, with an attorney’s help of course.
  • If your contract does not give you any action, you probably only have one option, which is to file a lawsuit. Once again, you should have your attorney’s help with this process. Assuming the contract clearly states how much you are owed, and you have been keeping records of the payments, the court should side with you.
  • You may be able to receive the value of the business in capital, or you may be given ownership again. In some cases, you have some control over which of these happen. If the business is failing after being sold, you may want to opt for a cash settlement.

The most important thing to remember is that you should have a business lawyer in Melbourne, FL on your side to get what is yours.

Thanks to The Law Offices of Arcadier, Biggie & Wood for their insight into business law and buyer defaults after after buying a business.