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Stan is selling his business to Betty. Their preliminary deal is that at closing, Betty will pay Stan 20% of the sales price. Then, she'll pay the remaining 80% in installments over a number of years. Tom is OK with this arrangement – though a bit worried about extending that much credit to Betty.

Are there steps he can take to help assure that Betty will eventually pay him in full? Absolutely. We'll look at those steps in this article.

While the size of the down payment and the remaining balance will vary from deal to deal, the idea of an installment plan is very common. Buyers rarely have enough cash on hand to pay the full price of a business – and bank loans can be hard to come by.

This means that if you're in the process of selling your business – or thinking of doing so someday – you, in effect, will probably become the buyer's banker. So how can you reduce the risk of receiving less than full payment?

There's no perfect answer to that question. No matter how careful you are, there's always some risk that you won't get full payment.
But here are seven suggestions for reducing that risk.

1. Investigate the Buyer's Credit History.

You'll want to see an up-to-date credit report so you know how good the buyer has been in paying bills on time. The credit report will also give you a lot of information about the buyer's current debts.

If you need more information, get the buyer's permission to contact past and present creditors directly.

For a fuller financial picture, you can ask the buyer for a financial statement. This will list the buyer's assets as well as debts.

2. Get as Large a Down Payment as Possible.

Twenty-five percent is better than fifteen percent. The more the buyer invests in the business, the harder he or she will work to protect that investment.

3. Agree on Realistic Payment Terms.

In many cases, the buyer will be counting on money from the business to make the monthly payments. Often, the business will be the buyer's primary source of income. Will the business produce enough money to provide for the buyer – and his or her family – and leave enough for the monthly payments?

If not, sooner or later the buyer will fall behind and you may have to scramble to get paid.