Vendor Finance & Deferred Consideration
You don't always need a bank. In complex commercial transactions, advanced deal-makers negotiate Vendor Finance, where the seller leaves part of their equity in the deal as a loan, dramatically reducing the deposit required.
The assumption that all property transactions require 100% of the funds to be delivered at completion is a retail mindset. In the commercial and high-value residential space, Vendor Finance (or Deferred Consideration) is a standard tool used to bridge valuation gaps or reduce the buyer's capital requirement.
How to Structure Deferred Consideration
Imagine a retiring landlord selling a £1M commercial portfolio. The buyer has secured senior debt for £700,000, leaving a £300,000 shortfall. The buyer negotiates a structure where they pay £800,000 on day one (the £700k bank loan + £100k of their own cash). The remaining £200,000 is deferred for 3 years, documented as a loan from the seller to the buyer, secured by a second charge or a personal guarantee.
Why would a seller agree? Because they may face a massive immediate Capital Gains Tax bill if paid entirely upfront, they may want an ongoing passive income (as the buyer pays interest on the deferred amount), or they simply want to achieve their asking price in a slow market. The buyer secures a £1M asset for just £100,000 in actual cash down. This is leverage applied directly to the negotiation table.