Business Seller Financing: How to Structure & Close Deals

What Is Business Seller Financing?

Seller financing-also called owner financing or seller carryback-is when the seller of a business acts as the lender instead of requiring the buyer to secure a traditional bank loan or pay 100% cash upfront. The buyer makes a down payment, then pays the rest over time directly to the seller with agreed-upon terms.

I've done five SaaS exits, and seller financing came up in nearly every deal conversation. Sometimes I offered it to make deals happen faster. Other times, buyers asked for it when their bank wanted ridiculous collateral or wouldn't finance the full amount. It's one of the most practical tools for getting deals across the finish line when traditional financing falls apart.

In the United States, approximately 60-90% of small business sales involve some form of seller financing. That's not because buyers can't get traditional loans-it's because seller financing creates better outcomes for both parties. It signals confidence, speeds up closings, and opens doors to more potential buyers who might not qualify for conventional lending.

Why Sellers Agree to Financing (and Why You Should Consider It)

If you're selling, you might wonder why you'd wait years to get your money instead of demanding cash upfront. Here's why it actually works in your favor:

• You close deals faster. Buyers who can't get bank approval or don't want to tie up all their cash still have a path to buy. More buyers means more competitive offers.
• You can command a higher price. When you offer financing, buyers often accept a higher purchase price because the cash flow structure is manageable for them. I've seen sellers get 10-20% more than their asking price by offering favorable financing terms.
• You earn interest. Instead of getting $500K cash and parking it somewhere, you might get $600K over time with 6-8% interest built in. That's significantly better than most conservative investment returns.
• Tax advantages exist. Spreading the sale over multiple years can reduce your tax hit compared to a massive lump sum. Talk to your accountant about installment sales treatment under IRS rules.
• You maintain some control. If the buyer defaults, you typically get the business back. That's better collateral than most investments offer.
• You demonstrate confidence. When you're willing to finance part of the sale, you're telling buyers you believe in the business fundamentals. This reduces perceived risk and makes buyers more comfortable paying your asking price.
• You expand your buyer pool. Many qualified buyers have the skills and experience to run your business successfully but lack access to the full purchase price in cash or traditional financing. Seller financing removes that barrier.

When I sold one of my earlier companies, the buyer had capital but didn't want to drain their reserves. We structured 40% down with the rest over three years. I got my number, they kept liquidity, and we closed in two weeks instead of waiting months for their bank. The interest I earned over those three years added another $45K to the final payout-money I wouldn't have seen in an all-cash deal.

Why Buyers Want Seller Financing

If you're buying, seller financing gives you leverage and flexibility that banks never will:

• Lower upfront capital required. You might put down 20-40% instead of 100%, freeing up cash for operations, hiring, or scaling.
• Faster closings. No bank underwriting process. No six-month waiting period. You negotiate directly with the seller and close in weeks.
• The seller has skin in the game. When the seller finances part of the deal, they're betting on the business continuing to perform. That tells you they believe in the numbers they showed you.
• More flexible terms. Banks have rigid requirements. Sellers can structure creative payment schedules, adjust for seasonality, or defer payments during a transition period.
• Easier to qualify. If your credit isn't perfect or the business doesn't fit traditional lending criteria, seller financing might be your only path.
• Better terms than alternative financing. Seller financing interest rates typically run 5-10%, which beats credit cards, merchant cash advances, or other high-cost lending options.
• Built-in transition support. Sellers who offer financing are usually more invested in helping you succeed during the handoff period. Their financial return depends on your success.

I've bought businesses where the seller knew the financials were solid but the business was too niche for a bank to understand. Seller financing made the deal possible when traditional lenders said no. It also gave me working capital to invest in growth immediately instead of depleting my reserves just to close the deal.

How Seller Financing Compares to Traditional Bank Loans

Understanding the differences between seller financing and bank loans helps you make better decisions about which route to pursue.

Bank loans require extensive documentation-three years of tax returns, financial statements, collateral appraisals, personal financial statements, business plans, and often personal guarantees. The underwriting process takes months. Sellers offering financing can review your financials in a week and make a decision based on their gut and your track record.

Banks typically lend based on strict loan-to-value ratios and require 20-30% down minimum, often more for riskier businesses. They also impose covenants that restrict how you operate the business. Seller financing lets you negotiate terms that make sense for both parties without arbitrary restrictions.

Interest rates on SBA loans currently range from 6-13% depending on the loan type and your qualifications. Seller financing usually falls in the 5-10% range, often with more flexibility on payment structure. The seller isn't bound by federal lending regulations, so you can get creative with balloon payments, seasonal adjustments, or revenue-based terms.

The biggest advantage of seller financing is speed and certainty. When a bank says yes, they still take 60-90 days to close. When a seller says yes, you can close in 2-4 weeks if you have the paperwork ready. That speed matters when you're competing for a good deal.

How to Structure Seller Financing Terms

The actual structure is where deals live or die. Here's what you need to negotiate:

Down Payment

Typically 20-50% of the purchase price. Sellers want enough upfront to feel secure. Buyers want to preserve capital. I usually landed around 30-40% as a sweet spot-enough for the seller to take me seriously, not so much that I'm cash-strapped on day one.

The down payment percentage often correlates with perceived risk. A stable, profitable business with recurring revenue might justify a 20-25% down payment. A turnaround situation or business with lumpy revenue might require 40-50%. Use the down payment as a negotiating lever-if you're putting more down, you should get a lower interest rate or more favorable terms.

Interest Rate

Expect 5-10%, depending on risk. If the business is stable with predictable revenue, you'll get closer to 5-6%. If it's volatile or the buyer has weak credit, sellers push for 8-10%. This should be higher than what the seller would earn in safe investments but lower than credit card debt or risky lending.

Interest rates also depend on the security structure. If you're offering solid collateral and personal guarantees, you should negotiate for the lower end of the range. If the seller is taking on significant risk with minimal security, expect to pay more.

Some deals use variable rates tied to prime rate or other benchmarks, but I prefer fixed rates. They're easier to budget for and eliminate arguments about rate adjustments later.

Term Length

Most seller-financed deals run 3-5 years. Longer terms mean lower monthly payments but more total interest. Shorter terms get the seller paid faster but require bigger payments. I preferred 3-year terms when selling-long enough to be manageable, short enough that I'm not waiting forever.

Some deals use longer amortization periods with balloon payments. For example, you might structure payments as if it's a 10-year loan, but the entire remaining balance comes due in year 5. This keeps monthly payments low while ensuring the seller gets paid out relatively quickly. Just make sure you have a refinancing plan before that balloon payment hits.

Payment Schedule

Monthly payments are standard, but you can get creative. Some deals include quarterly payments, balloon payments at the end, or revenue-based adjustments. I once structured a deal with lower payments in year one (transition period) and higher payments in years two and three when the buyer had full control.

Seasonal businesses might negotiate higher payments during peak months and lower payments during slow periods. Service businesses with recurring revenue might use percentage-of-revenue payments that adjust based on actual performance. The key is aligning the payment structure with the business's cash flow reality.

Security and Collateral

Sellers almost always require a security interest in the business assets. If the buyer defaults, the seller can reclaim the business. Some sellers also require personal guarantees from the buyer. This is non-negotiable for most sellers-they need protection.

The security agreement should specify exactly what happens in a default scenario. Does the seller get the business back immediately? Do they have to return any down payment? What happens to improvements or changes the buyer made? Get specific about these terms upfront to avoid litigation later.

Smart sellers also require life insurance on the buyer with the seller as beneficiary. If something happens to the buyer, the insurance pays off the note. It's cheap protection that gives both parties peace of mind.

Earnout Clauses

Sometimes part of the payment is tied to future performance. For example, the base price is $400K, but if revenue exceeds $X in year two, the buyer pays an additional $100K. This aligns incentives and reduces risk for buyers while giving sellers upside if the business crushes it.

Earnouts work best when the metrics are crystal clear and objectively measurable. Use revenue rather than profit (too easy to manipulate). Define exactly what counts as revenue-gross billings, net revenue after refunds, recurring revenue only, etc. I've seen earnout clauses destroy relationships when the definitions weren't tight enough.

When I was helping one agency structure their first acquisition, they were terrified of proposing seller financing terms. I told them the same thing I tell everyone: you need to approach this like cold email-test, measure, iterate. They sent their first offer, got pushback on the down payment percentage, and immediately wanted to quit. I had them rewrite just that one section of the term sheet, keeping everything else the same. The seller accepted within 48 hours. The deal closed at $600k with only $90k down, and that agency is now doing over $2M annually.

The Full Process of Negotiating Seller Financing

Here's how I approached these conversations from both sides:

Start the Conversation Early

Don't wait until you're deep into due diligence to bring up financing. Mention it during initial discussions. If you're a buyer, say something like, "I'm interested in the business. I have capital for a strong down payment and would love to discuss a financing structure for the balance." If you're a seller, mention it in your listing or early calls: "I'm open to financing a portion of the sale for the right buyer."

Being upfront about financing expectations saves everyone time. If the seller refuses to consider financing and you can't secure a bank loan, there's no point spending weeks on due diligence. If you're selling and the buyer expects 100% financing with nothing down, that conversation should end immediately.

Justify Your Ask

Buyers should explain why financing benefits both parties-faster close, maintained cash reserves for growth, aligned interests. Sellers should explain why their terms are fair-interest rate matches risk, term length is reasonable, down payment reflects market norms.

Come prepared with comparables. What are similar businesses selling for? What financing terms are standard in your industry? If you're asking for terms outside the norm, explain why. Maybe you're a proven operator with three successful exits. Maybe the business has unique risks that justify better terms.

Conduct Mutual Due Diligence

Buyers conduct due diligence on the business-financials, customer concentration, legal issues, operational dependencies. But sellers should also conduct due diligence on buyers, especially when financing is involved. Pull the buyer's credit report. Ask for bank statements proving they have the down payment. Check references from previous business ownership or management roles.

I've turned down buyers who looked good on paper but had terrible credit or a history of failed ventures. When you're financing the deal, you need confidence the buyer can execute. This isn't personal-it's protecting your capital.

Get Everything in Writing

Once you agree on terms, hire a lawyer to draft a promissory note and security agreement. Include payment schedule, interest rate, default terms, and what happens if the business fails. I've seen handshake deals turn into lawsuits. Don't skip this step.

The promissory note should specify the exact amount borrowed, interest rate, payment schedule, maturity date, and what constitutes default. The security agreement gives the seller a lien on business assets and outlines the foreclosure process. Some deals also include personal guarantees, spousal guarantees, and UCC filings to perfect the security interest.

Budget $2,000-$5,000 for a lawyer who specializes in business transactions to draft these documents. Using a generic template from the internet is asking for problems.

Use an Escrow Service

Some deals use escrow agents to handle payments and ensure compliance. The buyer pays the escrow service, which then disburses to the seller. This adds a layer of accountability and reduces conflict.

Escrow services charge a fee-usually a few hundred dollars per year-but they're worth it. They track payments, send reminders, maintain records, and provide neutral third-party documentation if disputes arise. Some escrow services also handle the payoff process and lien releases when the note is satisfied.

Common Seller Financing Structures

Not all seller financing deals look the same. Here are the most common structures I've seen:

Partial Seller Financing

The most common structure. The buyer secures a bank loan for 50-70% of the purchase price, makes a down payment of 10-20%, and the seller finances the remaining 10-30%. This is attractive because banks view seller financing as additional equity, making their loan less risky. The seller gets most of their money upfront from the bank proceeds and down payment, with a smaller note to carry.

I used this structure on two acquisitions. The bank was comfortable lending when they saw the seller had skin in the game via seller financing. It proved the seller believed in the numbers they were showing.

Full Seller Financing

Less common, but it happens. The buyer makes a down payment (typically 30-50%) and the seller finances the entire remaining balance. This works when banks won't lend-maybe the business is too small, too new, or too niche for traditional financing. It also works when the seller is highly motivated and confident in the buyer's ability to execute.

I offered full seller financing once when I wanted to exit quickly and the buyer was someone I knew and trusted. The deal closed in 10 days. I wouldn't recommend full seller financing to a stranger without extensive due diligence.

Seller Note with Earn-Out

A hybrid approach. Part of the purchase price is a traditional seller note with fixed payments. Another portion is an earn-out based on future performance. For example, $300K seller note over three years plus up to $200K in earn-outs if the business hits specific revenue milestones.

This structure works when there's disagreement about valuation. The seller thinks the business is worth more; the buyer thinks it's worth less. The earn-out bridges the gap-if the seller is right about growth potential, they get paid accordingly. If not, the buyer doesn't overpay.

Revenue-Based Financing

Instead of fixed monthly payments, the buyer pays a percentage of revenue until the note is satisfied. For example, 10% of gross revenue each month until the seller receives the full purchase price plus interest. This structure protects the buyer during slow periods and lets the seller benefit from growth.

I've seen this work well for seasonal businesses or businesses with unpredictable cash flow. The challenge is defining exactly what counts as revenue and ensuring proper accounting. You need tight controls and regular financial reporting to prevent disputes.

Red Flags and Deal-Breakers

Not every seller financing deal is good. Watch for these warning signs:

• Seller won't provide detailed financials. If they're hiding the numbers, they're hiding problems. Walk away.
• Seller wants 100% financing with no down payment. This usually means they're desperate or the business is failing. No serious seller does this.
• Buyer has no capital or business experience. If you're selling, don't finance the entire deal to someone with zero track record. You'll end up owning a broken business again.
• Terms are wildly one-sided. If the seller demands 15% interest on a stable business or the buyer wants 10-year terms with no collateral, walk away. Both sides need protection.
• No transition plan. Seller financing works best when the seller helps transition the business. If they're ghosting on day one, the buyer is set up to fail.
• Customer concentration issues. If 80% of revenue comes from one customer and the seller is offering generous financing, they might know that customer is leaving. Dig deeper.
• Declining revenue trends. Look at monthly revenue for the past 12-24 months. If it's trending down and the seller is pushing financing, they might be trying to unload a dying business.
• Seller is overly eager. Motivated sellers are good. Desperate sellers are red flags. If they're agreeing to every term you propose without negotiation, something is wrong.

I once almost bought a business where the seller offered generous financing but refused to show profit-and-loss statements from the previous year. That was my signal to move on. Transparency is non-negotiable.

What Happens If the Buyer Defaults?

This is the nightmare scenario sellers worry about. You've sold your business, the buyer stops making payments, and now you're stuck. Here's what actually happens:

First, the promissory note and security agreement define default. Missing one payment might not be default-there's usually a cure period of 15-30 days. Missing multiple payments, filing bankruptcy, or violating material terms of the agreement typically constitutes default.

Once default occurs, the seller can accelerate the debt-meaning the entire remaining balance becomes due immediately. The seller then exercises their security interest and forecloses on the business assets. Depending on state law and how the security agreement is written, this might require going to court or might allow the seller to repossess assets directly.

In most cases, the seller gets the business back. The challenge is that the business might be in worse shape than when you sold it. The buyer might have lost key customers, let systems deteriorate, or run up debt. You're getting back a damaged asset.

Some sellers mitigate this by including personal guarantees and pursuing the buyer's personal assets if the business assets aren't sufficient to cover the debt. Others require regular financial reporting as part of the agreement so they can spot problems early and work with the buyer before default occurs.

The best protection is selling to a qualified buyer and structuring reasonable terms. Desperate buyers with no capital and no experience are the ones who default. Experienced operators with skin in the game figure out how to make payments even when times get tough.

How to Find Buyers or Sellers Open to Financing

If you're looking to buy or sell with financing, you need to find people who speak your language. Most buyers and sellers are on marketplaces like Flippa, which lets you filter for financing options. You can also work with business brokers who specialize in seller-financed deals-they know how to structure terms and find qualified parties.

Business brokers typically charge 10-15% commission but they handle the entire process-valuation, marketing, buyer qualification, negotiation, and paperwork. If you've never sold a business before, the commission is worth it. If you're experienced, you might save the fee and handle it yourself.

If you're sourcing buyers or sellers directly, cold outreach works. Build a list of business owners in your target industry or buyers with acquisition track records. Tools that build prospect lists let you filter by company size, industry, and decision-maker title to find the right contacts. Then reach out with a short, direct message explaining what you're offering or looking for.

I built my first acquisition pipeline by cold emailing 200 agency owners who fit my criteria. Ten responded, three had serious conversations, and one led to a deal. The key is volume and specificity-know exactly who you're targeting and why they'd care.

You can also tap into entrepreneurship communities, private equity networks, and industry associations. Many of these groups have deal flow channels where members post businesses for sale or acquisition criteria. The challenge is cutting through the noise and finding serious parties.

I recorded a thorough guide on this:

Finding the right sellers to approach about financing is exactly like prospecting for cold email clients. You need their contact info, and you need to reach them directly-not through a broker who's incentivized to push all-cash deals. I've watched clients close seller-financed acquisitions by going straight to the business owner's personal email, bypassing intermediaries entirely.

Tax and Legal Considerations

Seller financing has real tax implications. As a seller, you might qualify for installment sale treatment under IRS rules, which spreads your capital gains tax over multiple years instead of hitting you all at once. But there are requirements-like you can't receive more than 30% of the sale price in the first year in some cases. Talk to a CPA before structuring your deal.

Installment sale treatment under IRC Section 453 allows you to recognize gain as you receive payments rather than all at once. This can significantly reduce your tax burden if you're selling a highly appreciated asset. However, depreciation recapture is typically taxed in the year of sale regardless of installment treatment, so plan for that hit.

As a buyer, interest payments on seller financing might be tax-deductible as a business expense, depending on how the deal is structured. If you're buying assets, the interest is typically deductible. If you're buying stock, the rules get more complicated. Again, get professional advice.

Some sellers structure deals as asset sales rather than stock sales to get better tax treatment. Asset sales allow the buyer to step up the basis of assets and depreciate them, providing tax benefits. Stock sales are simpler from a legal perspective but less favorable tax-wise for buyers. This affects negotiation-if you're asking for a stock sale, you might need to adjust the price to compensate the buyer for the tax disadvantage.

You also need a solid promissory note and security agreement drafted by a lawyer who understands business transactions. This isn't a personal loan between friends-it's a commercial transaction with enforceable terms. Budget $2,000-$5,000 for legal fees to do this right.

Some states require seller financing agreements to be registered or recorded. In other states, you need to file a UCC-1 financing statement to perfect your security interest in business assets. Your lawyer should handle these filings, but make sure they're done. An unperfected security interest is worthless if the buyer files bankruptcy or another creditor tries to claim the assets.

SBA Loans and Seller Financing

The Small Business Administration offers loan programs specifically designed for business acquisitions. The SBA 7(a) loan program is the most common, offering up to $5 million for qualified buyers. These loans typically require 10-20% down payment from the buyer, and lenders often require seller financing for an additional 5-10% of the purchase price.

Banks like SBA deals with seller financing because it shows the seller has confidence in the business. The seller note is typically subordinated to the SBA loan, meaning the bank gets paid first if something goes wrong. As a seller, subordination reduces your security, so you should factor that risk into your interest rate and terms.

SBA loans have strict requirements. The buyer must use the business as their primary occupation, the seller typically can't retain more than 20% ownership, and the business must be a for-profit operating company (not real estate investment or passive income). If you're considering seller financing alongside an SBA loan, work with a lender who specializes in SBA acquisitions-they'll guide you through the requirements.

The advantage of combining SBA financing with seller financing is that you get a relatively low-interest SBA loan for the bulk of the purchase price, you preserve some buyer capital with the smaller down payment, and the seller gets most of their money at closing while still earning interest on a small seller note.

Negotiating Tips from Both Sides of the Table

I've been the buyer and the seller in seller-financed deals. Here's what I learned about negotiation:

For Buyers

Lead with your qualifications. The seller is taking risk by financing the deal. Show them why you're a safe bet. Share your track record, your plan for the business, your financial capacity. Make them feel confident you'll succeed.

Propose terms that benefit both parties. Don't ask for 10-year terms at 3% interest with no collateral. Be reasonable. Show you understand the seller needs protection. Offer strong collateral, personal guarantees if necessary, and fair interest rates.

Use the down payment as leverage. If you're putting 50% down instead of 30%, you should get better terms on the note-lower interest rate, longer term, or more flexibility. More down payment means less risk for the seller.

Be transparent about challenges. If the business has issues you'll need to fix, acknowledge them and explain your plan. Sellers respect honesty. If you try to hide concerns and they come up in due diligence, you've lost credibility.

For Sellers

Qualify buyers early. Don't spend weeks negotiating with someone who can't afford the down payment or has terrible credit. Ask for financial statements and credit reports upfront. It's not rude-it's smart business.

Price the risk into your terms. If you're taking on significant risk by financing a large portion of the sale, charge accordingly. Higher interest rates, shorter terms, and strong security provisions protect you.

Build in monitoring rights. Your promissory note should require the buyer to provide monthly or quarterly financial statements. This lets you spot problems early and work with the buyer before default occurs.

Consider staying involved during transition. Offering 30-60 days of transition support reduces the buyer's risk of failure, which protects your note. You can structure this as paid consulting or build it into the purchase agreement.

Have a backup plan. What happens if the buyer defaults? Can you step back in and run the business? Do you have someone who can? Don't sell to someone if you're not willing to potentially own the business again.

Here's something I learned the hard way after going completely broke and $40,000 in debt early in my career: desperation kills deals. When I was at rock bottom at my parents' house with clients demanding refunds I couldn't pay, I had zero leverage. The same principle applies to seller financing negotiations. If you're reaching out to 100+ sellers using cold email (which you should be), you'll never seem desperate in any single negotiation. I've seen clients book meetings with business owners, and because they had ten other conversations happening simultaneously, they walked away from bad terms that they would have accepted if it was their only option.

Alternative Financing Options to Consider

Seller financing isn't the only creative option for business acquisitions. Here are alternatives worth considering:

Earnouts Instead of Seller Notes

Rather than a traditional seller note with fixed payments, structure the entire deal as an earnout. Pay a base price at closing, then additional payments based on future performance. This shifts risk from the buyer to the seller and aligns everyone around growth.

Equity Rollover

The seller retains a minority equity stake (10-30%) instead of taking a note. They participate in future upside if the business grows. This is common in private equity deals and works well when the seller has unique expertise or relationships that benefit the business post-sale.

Consulting Agreements

Instead of seller financing, the seller agrees to a long-term consulting agreement where they're paid monthly for advisory services. This achieves similar cash flow for the seller while providing the buyer with valuable expertise during transition. The consulting payments are tax-deductible for the buyer as a business expense.

Asset-Based Lending

If the business has significant assets-equipment, inventory, receivables-you might secure asset-based lending from specialized lenders. These loans are secured by specific assets and can cover 50-80% of asset value. Combined with a down payment, this might eliminate the need for seller financing.

Revenue-Based Financing from Third Parties

Some lenders offer revenue-based financing where you pay a percentage of monthly revenue until the loan is repaid. This is expensive (effective interest rates of 20-40%) but doesn't require personal guarantees or collateral, and payments flex with revenue.

My Take: When Seller Financing Makes Sense

Seller financing isn't always the answer, but it's one of the best tools for closing deals that banks won't touch or buyers can't afford upfront. I've used it on both sides, and it worked because both parties had aligned incentives-I wanted the deal to close, they wanted manageable terms, and we both wanted the business to succeed post-sale.

If you're selling, offer financing to serious buyers who have capital but want flexibility. You'll close faster and often at a higher price. If you're buying, propose financing when you have the down payment and confidence in the business but don't want to drain your reserves or wait for a bank.

Just make sure the terms are fair, the paperwork is airtight, and both sides have skin in the game. The worst seller financing deals happen when one party is desperate and the other takes advantage. The best deals happen when both sides are reasonable and focused on mutual success.

The key is understanding risk. Sellers are taking risk by lending, so they deserve compensation via interest and security. Buyers are taking risk by betting on a business they don't fully control yet, so they deserve reasonable terms that don't strangle cash flow. When both sides acknowledge each other's risk and negotiate accordingly, everyone wins.

One client came to me with $3,000 to their name, wanting to buy a $400k agency. Everyone told them it was impossible. I told them what I tell everyone starting with nothing: your lack of money is actually an advantage because it forces you to be creative. They pitched seller financing with a 12-month consulting arrangement where the seller would help transition clients, effectively de-risking the deal for both parties. The seller agreed to 85% financing because the structure made them feel protected. That's the same mindset I used to help entrepreneurs build companies from zero-you work with what you have and structure around constraints, not against them.

Real-World Examples from My Deals

Theory is useful, but real examples show how this works in practice. Here are three seller financing deals I was directly involved in:

SaaS Exit with 40% Seller Note

I sold a small SaaS company for $425K. The buyer put down $170K (40%), I carried a $255K note at 7% interest over three years. Monthly payments were $7,870. Why did I offer financing? The buyer was experienced, had successfully exited two previous companies, and I knew the business was solid. The financing let us close in two weeks instead of waiting months for his bank. I collected an extra $28K in interest over the three years and never had a late payment.

Agency Acquisition with SBA Loan + Seller Note

I bought a digital marketing agency for $680K. I put down $100K, secured an SBA 7(a) loan for $480K, and the seller carried a $100K subordinated note at 6% over five years. The SBA loan had a 10-year amortization and the seller note had a 5-year balloon. This structure let me preserve capital for operations while giving the seller most of their money upfront. The seller note signaled confidence to the bank and made the SBA loan easier to get approved.

Failed Deal That Taught Me a Lesson

I once considered buying an ecommerce business where the seller offered incredible terms-20% down, 4% interest, seven years. It seemed too good to be true. Turns out it was. When I dug into financials, I discovered their main supplier was discontinuing the product line and 70% of revenue came from that product. The seller knew the business was dying and was trying to offload it with generous financing before everything collapsed. I walked away. The lesson: when terms seem unusually generous, find out why.

Resources for Structuring Your Deal

If you're serious about buying or selling a business with seller financing, here are resources that helped me:

Work with a business broker who specializes in your industry. They've structured hundreds of deals and know what terms are standard, what's aggressive, and what's ridiculous. Their commission is worth it if you've never done this before.

Hire a CPA who understands installment sales and business acquisitions. The tax implications are significant, and making the wrong choice can cost you tens of thousands. A good CPA pays for themselves many times over.

Get a lawyer who specializes in business transactions, not just general contracts. Business acquisitions have specific legal requirements, security filings, and liability issues that general practice lawyers miss. Expect to pay $200-$400 per hour for someone good.

Use a deal checklist to make sure you're covering everything-valuation, due diligence, earnest money, letter of intent, purchase agreement, promissory note, security agreement, UCC filings, transition plan, and closing documents. Missing one step can delay the deal or create problems later.

I walk through deal structuring and exit strategies in more depth inside my coaching program, where we cover everything from valuation to negotiation tactics to finding buyers for your business.

How to Build Your Business for a Future Seller-Financed Exit

If you're currently running a business and think you might sell it someday, build it in a way that makes seller financing attractive:

Document everything. Buyers want clean financials, documented processes, and transparent operations. The easier you make due diligence, the more confident buyers will be and the better terms you'll get.

Reduce key person dependency. If the business can't run without you, buyers will demand more seller involvement post-sale or lower the price. Build systems and train people so the business operates smoothly when you're not there.

Diversify revenue. Customer concentration is a huge risk factor. If one customer is 40% of revenue, buyers will discount the price or demand earnouts tied to that customer staying. Spread revenue across more customers to reduce risk.

Maintain clean books. Use accrual accounting, reconcile monthly, and have annual financial reviews or audits. Buyers trust clean books. Messy books raise red flags and complicate seller financing negotiations.

Build recurring revenue. Businesses with predictable monthly recurring revenue are easier to value and finance. One-time project revenue is lumpy and risky. The more predictable your cash flow, the better your financing terms.

I've bought businesses that were perfectly positioned for seller financing and others that were nightmares. The difference was how the previous owner built and managed the company. Think about your exit from day one, even if it's years away. For frameworks on building a sellable agency or service business, check out the 7-Figure Agency Blueprint where I cover positioning, systems, and exit planning.

If you want your business to be attractive for seller financing when you exit, you need to be doing outbound right now. I watched one agency go from $20 million to positioning for a $60 million valuation in under 6 months, just by implementing systematic cold email. Why does this matter for your exit? Because buyers want to see predictable revenue generation that doesn't rely on the founder's personal network. When you can show that your business generates customers through repeatable outbound systems-not just referrals-you're demonstrating that the business will survive after you're gone. That makes seller financing far less risky for you as the seller.

Final Thoughts

Seller financing gives you options when traditional paths don't work. I've seen it rescue deals that were dead in the water and create outcomes both sides were thrilled with. The key is understanding what each party needs, structuring terms that protect both sides, and getting everything documented properly.

Whether you're buying your first business or selling your fifth exit, seller financing is a tool worth understanding. It opens doors, speeds up closings, and creates win-win scenarios that all-cash or all-bank-financed deals can't match.

The businesses that change your life aren't always the ones you can afford to buy outright. Sometimes the best deal is the one you structure creatively with a seller who believes in your ability to execute. And if you're selling, the best buyer isn't always the one with the most cash-it's the one with the right skills, commitment, and willingness to structure terms that work for both of you.

If you're serious about buying or selling a business, learn how to structure these deals. It's one of the most valuable skills you can have as an entrepreneur. The ability to negotiate seller financing has made me hundreds of thousands in deals that wouldn't have happened otherwise. It'll do the same for you if you approach it strategically and fairly.