How Vendor Finance Works on a Multi-Million Venue Sale
How Vendor Finance Works: Venue Sale | Switchboard Finance
Accommodation Finance
Vendor Finance · Venue Sale · Going Concern
How Vendor Finance Works on a Multi-Million Venue Sale
When a buyer is short the final slice on a multi-million venue, the seller can carry the gap. Here is how a vendor carry is structured, why it sits behind your senior lender, and how it gets cleared.
Quick Answer
Vendor finance is when the seller of a venue carries part of the price as a loan, sitting behind your main lender. On a going concern sale it can close the slice a senior facility will not cover. It is solicitor-documented, business-purpose credit. See how vendor finance works.
How vendor finance works when you buy a venue
A venue sale can agree on price and still stall on the last slice of funding, the gap between what a senior lender will advance and the equity a buyer has in hand. Vendor finance is one way that gap gets closed: the seller carries part of the purchase price as a loan, so the buyer does not have to fund the entire venue on settlement day. On a multi-million freehold sale, that carry usually bridges the slice between the senior facility and the buyer's own equity, and it runs as solicitor-documented, business-purpose credit, not a handshake.
Where this commonly lands is a buyer who has the deposit and a senior facility approved, but is short the final piece on a going concern that values the property and business as one. Rather than walk away, the vendor agrees to carry that gap and be repaid later. The government's own guide to business funding options lists seller or vendor terms among the ways a purchase gets across the line.
Why the carry sits second, behind the senior lender
A vendor carry sits second-ranking, behind the senior lender, because the senior facility funds the largest share and takes first call on the security. The vendor's slice is registered behind it, most often as a second mortgage over the property or a general security agreement registered on the PPSR. The ranking is not assumed, it is documented in a deed of priority that both lenders sign.
That ranking is the whole architecture of the deal. A second mortgage or second-ranking security only has value if the first lender consents to sit in front of it and agrees how enforcement would work, the same dynamic that shapes a second mortgage behind a commercial property loan. This is why a vendor-finance structure is built with the senior lender in the room, not bolted on afterwards. The vendor typically carries around 10 to 25% of the price, indicative and deal-specific, with the senior facility around 60 to 70% and the buyer's equity filling the rest.
When a senior lender will consent to a vendor carry
A senior lender will consent to a vendor carry when the second-ranking debt does not threaten its own position and the buyer can still service both facilities. Consent is the make-or-break step, and what holds up at credit is a clean ranking, a realistic exit, and a buyer who is not over-geared. Where consent is refused, the carry usually has to shrink or the deal has to restructure.
Where a carry passes
- Senior lender consents and signs a deed of priority
- The carry is a modest slice, not the bulk of the price
- Buyer can service both the senior facility and the carry
- A clear exit, cleared by refinance, is mapped from day one
- Carry is solicitor-documented, business-purpose credit
Where a carry stalls
- No written consent from the senior lender to rank behind
- Carry so large the buyer has little real equity in the deal
- Combined repayments the trading venue cannot cover
- No exit plan, so the carry has nowhere to go
- Vague terms, no deed of priority, no PPSR registration
The split between these two columns is rarely about the venue itself. It is about whether the paperwork and the serviceability give the senior lender comfort to share the security.
How and when the vendor carry gets cleared
A vendor carry gets cleared by refinance, typically over two to five years, varies by deal, once the business has a trading record the next lender can read. The buyer takes the venue through a couple of full years, the going concern valuation firms up, and a new senior facility refinances and pays out the vendor's slice. That exit is planned at the start, not improvised at the end.
Mapping the exit strategy up front is what makes the carry fundable in the first place. It also keeps the structure clean, because a vendor carry is not a deferred settlement, the sale completes now and the balance sits as secured credit, rather than the settlement date being pushed out. If a buyer needs short-term funding to manage a timing gap rather than a vendor carry, that is a job for a caveat loan or private lending, not the vendor. Whichever path fits, the structure should be set with a broker before contracts are signed.
Vendor finance turns the seller into a short-term lender for the final slice of a venue purchase, sitting second behind your senior facility and documented in a deed of priority. It works when the senior lender consents, the buyer can service both facilities, and a refinance exit is mapped from the start. Treated as solicitor-documented, business-purpose credit with a clear repayment path, a vendor carry can be the difference between completing a going concern sale and missing it.
Key takeaway: A vendor carry only works when the senior lender consents to rank in front and you have a refinance exit mapped before you sign.Frequently Asked Questions
Vendor finance works by having the seller of the business carry part of the purchase price as a loan, rather than you funding the whole amount on settlement day. On a venue sale the carry usually sits behind your main facility and is solicitor-documented, business-purpose credit. It is one way to close the final slice a senior lender will not cover. Read how vendor finance is structured.
How much a vendor carries depends on the deal, but the vendor typically carries around 10 to 25% of the price, indicative and deal-specific. The senior facility still funds the bulk, usually around 60 to 70%, and your own equity makes up the rest. The exact split varies by deal and by what the senior lender will consent to. See where a second mortgage sits in the ranking.
The senior lender does have to agree, because a vendor carry sits second behind the senior facility and that ranking is fixed by a deed of priority. Without the senior lender's written consent to sit in front, the carry cannot be registered behind it in a way the parties can rely on. This consent is usually the make-or-break step on a vendor-finance deal. Learn how vendor finance ranking works.
Vendor finance is not the same as a deferred settlement, although both delay part of the payment. A deferred settlement pushes the completion date out, while a vendor carry completes the sale now and leaves part of the price owing as a secured loan. The two can appear in the same transaction but they solve different problems. See the vendor finance page for the carry structure.
A vendor carry is paid back through an agreed exit, most often cleared by refinance, typically over two to five years, varies by deal. As the business beds in and the going concern valuation firms up, a new senior facility can refinance and pay out the vendor's slice. Mapping that exit strategy up front is what keeps the carry fundable.
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