With vendor finance, the seller agrees to receive part of the price after completion, over an agreed period. The deal still completes in full on day one. The deferred part is documented as a loan from the seller to you. It works on both share and asset purchases.
Why buyers and lenders like it
- It cuts the cash you need on day one.
- It keeps the seller invested in a smooth handover, because they're only paid in full if the business does well enough to pay them.
- Lenders usually count it close to your own money, if it ranks behind them. See How much deposit do I need to buy a business?.
The three forms
- Deferred consideration: a fixed amount, paid on agreed dates. The simplest form.
- Vendor loan note: a documented loan from the seller, usually with interest, and usually ranking behind the main lender.
- Earn-out: payment that depends on how the business performs after the sale. Common where your price and the seller's expectations are apart. See How does an earn-out work when buying a business?.
In practice
In our £1 million example, the vendor loan is £150,000 of the price. See How is buying a business usually funded? The capital stack. The main lender will want the seller's ranking agreed in writing before completion, and we negotiate that alongside the main facility.
Last reviewed: 8 October 2026