When you buy a business is it typical for the loan to say if you are late 15 days you owe the entire balance in full?

I know literally nothing about business law.

Logically, I have to wonder how it would benefit the seller to sell their business, turn it over to whoever to do the gods know what to it, run it into the ground perhaps, then take it back as collateral on the loan.

They don’t want it back after the buyer has messed with it; they want their money.

If the seller gave you a loan to allow you to purchase the business, what you have is an agreement in relation to the money you’ve borrowed, rather than about the business you bought. They are two separate deals. You agreed to buy at $xxx price, that’s deal one. They agreed to loan you $xxx to buy a business, that’s deal two. If you don’‘t pay back the loan, you have breached the contract relating to the second deal. You still bought the business.

I also imagine the seller wouldn’t want the business back. They sold it after all. And, if you have been running the business for a period of time, its value may have diminished.

A lot of those “we finance anyone” car lots do that. It’s predatory and they want people to default. They probably resell cars several times. I would be very careful with a loan that has terms like this.

@Are_you_kidding_me What do the loans that are more lenient on the person taking out the loan say? What would the wording be?

Not sure, never taken out a loan like this. I always went through a lender like a bank or mortgage company. I would just be carefull.

It certainly looks as if the seller believes the amount owed is greater than the value of the business.

With the caveat that the amount owed is greater than the value of the business to the owner.
If the owner is retiring and/or relocating, they could give the buyer a sweetheart deal to ensure their business carries on, while at the same time not wanting the business back.

I second “Just be careful.”

@JLeslie Even though it parallels my own loan commitment, you may want to have an attorney look at this document. My own seller financed agreement specifies I am in default if I do not pay the amount due within 10 days of the due date as well and I am in default and similar actions will go into motions. Cut and paste below….

the failure by the Maker to pay (i) any installment of principal or interest
payable pursuant to this Term Note-l within ten (10) days after the date when due, or
(ii) any other amount payable to the Lender under this Term Note-i, or any of the Other
Agreements within ten (10) days after the date when any such payment is due in
accordance with the terms hereof or thereof; or
(b) the occunence of any “Event of Default” under any of the Other
Agreements.
This Term Note-l evidences the Term Loan-l incurred by Maker under and pursuant to
the Loan Agreement, to which reference is hereby made for a statement of the terms and
conditions under which the Maturity Date or any payment hereon may be accelerated. The
Holder (the term “Holder” shall include the Lender and any subsequent holder hereof) of this
Term Note-l is entitled to all of the benefits and security provided for in the Loan Agreement.
All unpaid amounts owing on this Term Note-1 or on any other Obligations immediately
shall become due and payable at the option of the Holder, without notice or demand, upon the
occuffence of any Event of Default.

^ Who edited that document?

@Seek I just copied, cut and pasted intact from the original PDF to the section above. I think since it was a PDF there is some formatting nurgles when I pasted that I did not want to bother with.

I just noticed that the word occurrence is spelled incorrectly twice.

@Seek It is spelled correctly in the original doc. I have never had anything but hairballs when cutting and pasting PDF’s