Seller Financing and Debt Payments?
QQ for you on how seller financing and debt payments work. Not sure where the best place to post this is, so giving it a whirl here.
Suppose I want to buy a business for $800k that has $200k/. The $800k purchase will be $125k equity, $275k debt and $400k of seller financing. The question is, with the $200k of EBITDA, how is priority between debt service and seller financing normally handled?
Does the debt service have priority? Meaning you pay say $75k of debt service, then the remaining $125k goes to seller financing?
Or does the seller have priority and they get the $200k, then you have to service debt out of pocket until the seller is paid off?
Trying to negotiate with a seller right now, so any advice on what's normal / industry standard would be appreciated.
Thanks in advance!