Seller financing means the seller carries part of the purchase price in the form of a loan to the buyer. It is most common in deals supported by SBA lending, where banks often require the seller to finance a portion of the price. Typically, this ranges from 10%–20% of the deal value.
The benefits are clear: it expands the pool of qualified buyers, makes lenders more comfortable funding the transaction, and can offer tax advantages to the seller by spreading income over time. It’s like putting a “batteries included” sticker on your business — it just makes the deal more appealing.
Non-payment: the buyer may default on the note (and suddenly you’re playing banker when you didn’t plan to).
Business mismanagement: if the buyer struggles to run the business, the seller’s repayment is jeopardized.
Capital tied up: sellers may have to wait years for full repayment — patience is a virtue, but it shouldn’t be your retirement plan.
These risks highlight why structure and safeguards are essential.
The foundation of safe seller financing is solid documentation. At minimum, sellers should require:
A promissory note clearly outlining payment terms (because a handshake doesn’t hold up in court).
A security agreement that gives the seller rights to repossess business assets if payments aren’t made.
A personal guarantee from the buyer to hold them individually accountable.
A UCC filing to publicly secure the seller’s position on business assets.
Let’s consider a $900,000 sale. In one common SBA-approved structure:
Buyer cash: $150,000 (17%)
SBA loan: $600,000 (67%)
Seller financing: $150,000 (17%)
That $150,000 seller note often makes or breaks the deal. Without it, the SBA loan may not be approved, and the buyer may lack the capital to close. To safeguard it, the seller should lock in protections like a promissory note and a security interest.
When setting terms, sellers should carefully consider:
Interest rates in line with market standards.
Amortization structures that ensure regular repayment.
Whether to use a balloon payment or full amortization.
Balancing buyer flexibility with seller security.
Before agreeing to carry financing, sellers should do their own due diligence:
Review the buyer’s creditworthiness (if they can’t manage their personal credit card, don’t hand them your business).
Require personal financial statements.
Confirm the buyer has the experience to successfully operate the business.
The stronger the buyer, the safer the financing — and the fewer sleepless nights you’ll have.
A safe seller financing arrangement requires the right team:
Attorneys to draft and review loan and security agreements.
CPAs to structure the note in a tax-efficient way.
Brokers to negotiate terms and balance the needs of both parties (and keep everyone from flipping the table during negotiations).
Seller financing can be the bridge that closes the gap between a buyer’s resources and a bank’s willingness to lend. When structured correctly, it not only helps maximize your sale price but also demonstrates confidence in your business to the buyer. With strong documentation, fair terms, and professional guidance, seller financing can be both safe and strategic — helping you exit on solid ground while instilling confidence in the new owner. And if you do it right, you won’t just sell your business — you’ll sell peace of mind, too.