Fixed Interest Rate
Most website sales involving seller financing structure the loan with a fixed interest rate that is fixed throughout the life of the loan.
In this way, the website buyer can calculate more accurately how much of the website’s income will go to paying down the debt. It is also easier for the website seller to estimate the borrower’s ability to repay if the debt payments are fixed throughout the term of the loan.
In some rare cases, the buyer may request a variable fixed rate that increases over time. This could be appropriate if the buyer believes that the website’s revenues will increase significantly over time and thus he would be able to pay the higher interest rate later. Thus, the loan could be structured with a low initial interest rate and a higher rate or balloon payment in the future.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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