When financing falls apart on a deal, it’s often not because the numbers don’t work — it’s because people overlook the simplest source of capital available: the seller.
I recently had an interesting phone call with an equipment leasing broker who specializes in arranging operating and capital leases for heavy equipment, restaurant equipment, and store fixtures. https://youtu.be/LH3FdgmywrA
He was working on a deal involving a small specialty food store that was shutting down. The business had reached the end of its lease, and all of the equipment was still installed in the space — display cases, coolers, counters, baskets, trays, and all kinds of small items.
A successful food operator in a neighboring town wanted to expand into this location. The brand was strong, the operator had decades of experience, and the opportunity made sense because much of the infrastructure was already in place. Expanding into a fully equipped space dramatically reduces startup costs and risk.
Where the Financing Hit a Wall
The leasing broker was able to arrange financing on all of the major equipment — anything with serial numbers such as refrigerated display cases, freezers, and likely the point-of-sale system.
But the smaller items created a problem.
Trays, baskets, scoops, and small fixtures don’t have serial numbers. They’re easy to move, hard to track, and not permanently attached to the building. From a lender’s perspective, these items don’t make good collateral. If the bank ever had to seize them, they could literally walk out the back door.
As a result, no lender wanted to finance that portion of the equipment package.
The buyer was already going to be stretched putting up the cash for inventory, so the broker called me asking if I had any ideas for how to finance that last piece of the deal.
Installation Value Changes Everything
This immediately reminded me of concepts I use when performing machinery and equipment appraisals — specifically the difference between:
Fair market value in continued use, and
Fair market value removed (liquidation value).
For many pieces of equipment, a huge portion of the value isn’t the metal itself — it’s the installation.
Think about a large refrigerated cooler. It might be manufactured overseas, shipped, delivered, installed, wired by electricians, and connected to compressors and plumbing. All of that labor and logistics add enormous value.
If the equipment stays in place and continues operating, that value is preserved.
If it gets removed, much of that value disappears instantly.
Once it’s disconnected, hauled away, stored, and eventually sold, you’re now dealing with a fraction of its original value.
The Simple Solution: Seller Financing
My suggestion to the leasing broker was straightforward.
If the big equipment can be financed through leasing companies, then the seller should finance the smaller items directly, just like vendor financing in a business sale.
Even though this isn’t technically goodwill, the seller is protecting the installation value of the equipment. If the deal collapses and the equipment has to be removed, the seller faces storage, transport, and resale losses. The buyer, on the other hand, receives maximum value by keeping everything in place and operational.
By holding a note on the smaller equipment, the seller:
Protects the value of what they already own
Makes the transaction possible
Often achieves a higher total recovery than liquidation would provide
From the buyer’s perspective, it reduces the upfront cash burden and keeps the expansion financially manageable.
Why People Rarely Think of This
One of the most surprising things I’ve observed over the years is how rarely people think of simply asking the seller to finance part of a deal.
It’s often the easiest source of financing available.
If someone owns the assets outright, they can decide to accept payments over time simply by agreeing to it. There’s no bank committee, no rigid underwriting, and no collateral hurdles.
In many cases, seller financing creates a win-win outcome that wouldn’t exist otherwise.
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