Vendor Finance: When the Seller Becomes Part of the Deal Structure
Vendor finance occurs when a seller agrees to defer part of their proceeds as a loan to the buyer — effectively contributing to the financing of their own sale. Used in commercial and development deals to bridge funding gaps.
In a vendor finance arrangement, rather than receiving 100% of the purchase price at completion, the seller receives, say, 80% and holds a 20% vendor loan secured against the property. This allows the buyer to complete with less external financing. The vendor loan typically carries an agreed interest rate and repayment schedule. Vendors accept this structure when they are motivated to sell (e.g. retirement, restructuring) but want a continuing income stream, or where the buyer's development plan will increase the ultimate value significantly — meaning a deferred payout is preferable to a lower immediate cash offer. Phantom Finance regularly structures vendor finance tranches into complex commercial acquisitions.