Have you ever heard of the seller's credit? Little known, it can be considered when buying a business, a company or even a real estate. Stéphanie Swiklinski, a notary graduate, offers us an alternative to the classic credit.
In what area is vendor credit used?
Vendor credit represents a method of payment of a sale price. It can be granted between professionals, during the transfer of a business or a company. This is known as a "business vendor credit" granted to the buyer. Between private individuals, the real estate field uses this credit technique but less frequently than in business law. The seller of a real estate property will then grant a loan directly to the buyer, at conditions normally more favorable than those of the banks. This solution of financing makes it possible not to solicit the banking establishments, by financing a purchase with a personal contribution for example and the remainder with a credit salesman. Granting this method of payment to the buyer is a sign of confidence. The risk will then fall directly on the seller and no longer on the banker!
Is the seller's loan really interesting ?
In real estate, the seller's credit never concerns the entire sale price of the house or apartment. It represents at most half of the price and often only 30%. Thus, the buyer can pay a part in cash, if he has a personal contribution and complete with a credit granted by his seller. Another possibility, the seller's credit can come in addition to a contribution and a real estate loan. The bank, in this case, will grant its loan more easily because the amount to be financed will be lower. The seller's loan remains an uncommon option, allowing to reduce the role of the bank in the financing. Be careful, however, to tell your banker that you want to make both a "classic" loan and a vendor loan. Everything must be taken into account when calculating the debt ratio.
What are the legal terms of the seller's credit ?
Even if the seller's loan represents a certain freedom, it is also subject to rules. It must be regularized by an authenticated deed specifying the amount of the loan, its duration (shorter than for a classic loan in general), the terms of repayment and the interest rate. These different points are freely fixed by the parties. The seller's credit is actually not very practiced at the moment, considering the low interest rates granted by the banks. In order to limit the risks of non-payment on the seller's side, it will be necessary to foresee the setting up of guarantees when drawing up the notarized deed. They will depend on the type of property sold (business, company or real estate). It is also recommended to include in the deed a clause obliging the buyer-borrower to take out a death and disability insurance policy for the seller.
Stéphanie Swiklinski