Vendor loan

A vendor loan (crédit vendeur) is a partial acquisition financing mechanism in which the seller accepts to receive a portion of the sale price as a loan to the acquirer — repayable with interest over an agreed period. It bridges the gap between available bank financing and the total acquisition price, enabling transactions that bank debt alone could not fully finance. For the seller, it implies counterparty risk on the loaned amount; for the acquirer, it reduces the initial equity requirement. In LBO structuring, it ranks subordinated to senior bank debt.

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Example: in a CHF 12.0 million Swiss SME acquisition, the seller accepts a CHF 2.0 million vendor loan (17% of price) over 4 years at 5% annual interest — enabling the acquirer to raise only CHF 7.0 million of senior bank debt (58%) and contribute CHF 3.0 million equity (25%). The vendor loan ranks junior to bank debt: repayable only after full senior debt service, making it a quasi-equity instrument in distress scenarios.

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Hectelion structures vendor loans as acquisition financing complements in mandates where the bank financing gap cannot be closed through equity or standard debt instruments alone.