Vendor Loan

A vendor loan is a financing instrument in which the seller does not receive part of the purchase price immediately, but instead defers it to the buyer as a loan. The deferred amount is charged interest and repaid over an agreed period. In effect, the seller participates in financing their own transaction.

Vendor loans frequently close a funding gap when banks or equity providers do not cover the entire purchase price. They also signal the seller's confidence in the company's future, because repayment depends on its ongoing commercial success. From the buyer's perspective, a vendor loan reduces the immediate capital requirement, but it is usually subordinated and priced accordingly.

In the German Mittelstand, vendor loans are particularly common in succession situations and in a trade sale. They complement earn-out models and are often used in a company sale. As part of our M&A advisory, we assess whether a vendor loan strengthens your negotiating position.