Offering to finance a portion of the sale can expand your buyer pool, accelerate closing, and — in many cases — increase your total proceeds. Here's everything you need to know before deciding.
Seller financing means you act as the lender for a portion of the purchase price. The buyer pays a down payment at closing, then makes regular payments — principal plus interest — to you over an agreed period.
A typical structure involves the buyer paying 70–80% at closing (via their own equity plus an SBA or conventional loan) and the seller financing the remaining 20–30% via a promissory note.
Seller notes are typically subordinated to any bank debt — the bank gets paid first if the business defaults. This is a real risk, which is why note terms matter enormously.
SBA lenders often require the seller to carry a standby note — typically 10–15% of the purchase price — as a condition of loan approval. Payments on this note may be deferred for 24 months. It's a common structure in well-run SBA transactions that ultimately benefits both parties.
When seller and buyer can't fully agree on value, a seller note can close the gap. The seller gets the higher price they want; the buyer pays the premium over time — sometimes with performance contingencies built in.
Some of the best buyers are highly capable operators who lack the capital for an all-cash deal. Seller financing allows you to sell to the person most likely to succeed — protecting the business you built and maximizing the chance your note gets repaid.
When part of your business's value depends on a future outcome — a contract renewal, pending product launch, or key employee retention — an earnout lets you capture that upside if it materializes, without the buyer paying for something that hasn't happened yet.
Always require a personal guarantee from the buyer — this holds them personally liable, not just the business entity.
Secure the note with a first or second lien on business assets where possible, giving you recourse in a default scenario.
Require regular financial reporting so you can monitor business health during the repayment period.
Work with a business attorney to draft the promissory note, security agreement, and guarantee documents properly.
Consider a life insurance assignment on the buyer, so the note is paid in the event of their death.
Every situation is different. Our brokers can walk you through the tradeoffs specific to your business, buyer pool, and financial goals — with no obligation.
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