Seller financing means the owner lends you part of the purchase price, and you pay it back out of the business over time. On deals we've closed, the seller note has covered anywhere from 10 to 20 percent of the price, and on one add-on deal it covered all of it. Interest usually runs 6 to 8 percent. From October 1, new rules for government-backed small business loans limit how much of your down payment a seller note can count for.
How a seller note actually works
A seller note is a loan from the person selling you the business. You sign a promissory note, the business makes the payments, and the seller gets paid over years instead of all at once at closing.
Four terms decide what that note really costs you:
- Term. How long you have to pay it back.
- Balloon. A date when whatever is left comes due in one payment, even if the term is longer.
- Rate. The interest the seller charges.
- Standby. A period where the seller agrees not to take payments, usually because a bank loan sits ahead of the note and the bank wants to be paid first.
Here's what that looks like on a real deal. On a Colorado HVAC company that sold for $1.99 million, the stack was 70 percent from a Small Business Administration loan, the government-backed loan most buyers use and the one everyone calls an SBA loan, 10 percent from a financial partner, 10 percent from our investor network, and a 10 percent seller note on a 10-year term with a 5-year balloon. The seller got most of his money at closing and the rest over five years. The buyer got a business the bank would fund.
Five real deals, side by side
Most articles on this topic give you ranges. These are deals we closed.
| Deal | Seller financing | Rest of the deal |
|---|---|---|
| Colorado HVAC, $1.99M | 10% seller note, 10-year term, 5-year balloon | 70% SBA, 10% financial partner, 10% from our investor network |
| Lakeside HVAC, closed March 2025 | 20% seller financing | SBA loan. The buyer put $0 down |
| Seven Orangetheory studios, Arizona, $1.1M | $100K seller note | $120K down from the buyer, 80% SBA |
| Four fitness locations, Texas | 10% seller note | 75% SBA, 13% from investors, 2% of the buyer's own cash |
| Party rental add-on, Massachusetts | 100% seller financed | No bank. The seller also earns an earnout and a commission |
Two things jump out. The note is rarely the biggest piece, but it's often the piece that makes the deal work. And the buyer's own cash can be very small when the rest of the structure is built right.
Why a seller agrees to carry a note
If you're the owner being asked, a note can feel like a risk. Here's why sellers say yes.
It widens the pool of buyers. A buyer who can't write a check for the whole price can still buy a good business. More qualified buyers means a better price.
It keeps you invested in the handoff. When part of your money arrives over time, you have a reason to make the transition go well. Buyers and lenders know that, and it builds trust.
It can spread out the taxes. Getting paid over several years can change when you owe tax on the sale. Talk to your CPA about what that means for you.
We introduce buyers and sellers early for this reason. A note only works when both sides trust each other.
When a seller finances the whole thing
Most sources will tell you 100 percent seller financing is rare. It is. But it happens, and here's how one of ours came together.
Charlotte, a first-time buyer, closed on a party rental business in Western Massachusetts using an SBA loan. The seller trusted her, and he brought her a second opportunity: his largest local competitor, whose owner wanted to sell to someone who would take care of the business. Her SBA capacity was already tied up in the first deal.
So we structured the second one with no bank at all. The competitor's owner financed the full purchase price, and on top of that he earns an earnout and a commission tied to how the business does. He gets paid more if it keeps performing, and Charlotte now controls the full local market. Read Charlotte's full story.
What changes on October 1
Under the new SBA rules, a buyer still has to put in at least 10 percent of the project cost. Seller notes, standby debt and some investor money are now "limited" sources, and together they can't cover more than half of that 10 percent. We covered the full rule change in what SOP 50 10 8.1 means for buyers and sellers.
That matters for a deal like Lakeside. It closed in March 2025 with $0 down from the buyer and a 20 percent seller note. Under the new rules, that exact structure won't work on an SBA loan. The buyer would need real cash in the deal.
It doesn't mean zero down is gone. It means the SBA isn't the only road.
A full seller-financed deal doesn't involve the SBA at all, so the SBA's down payment rules don't apply. That's how Charlotte's second deal closed.
We also work with specialized lenders who will fund buyers with no money down, using investor money in place of the buyer's cash. So when a deal doesn't fit the SBA's rules, we don't have to force it. We find the lender it does fit.
What to negotiate on a seller note
Every part of a note is up for discussion. These are the terms that matter most:
- The term and the balloon. A longer term lowers your payments. A balloon brings the final payment forward. Know both before you sign.
- The rate. We see 6 to 8 percent on most deals. It should reflect the risk the seller is taking, and it has to fit your cash flow.
- Standby. If there's a bank loan, expect the bank to require a standby period. Agree on it early so it doesn't surprise anyone at closing.
- What secures the note. Sellers usually want a claim on the business assets. Make sure it sits behind any bank loan.
- What happens if the business struggles. A good note has room for a slow season. Charlotte's rental business shuts down every winter, and that kind of cash flow has to be planned for.
Frequently asked questions
Is seller financing a good idea for the seller?
Often, yes. It brings in more qualified buyers, it can support a better price, and it can spread out the taxes. The risk is that the buyer doesn't pay, which is why the note should be secured and the buyer properly vetted before closing.
What's a typical interest rate on a seller note?
We see 6 to 8 percent on most deals. It is always a point of negotiation, and the rate should reflect the risk the seller is taking and whether a bank loan sits ahead of the note.
Can you buy a business with 100 percent seller financing?
Yes, but it's rare. It works best when the seller knows and trusts the buyer, and often on a smaller or add-on deal. Charlotte's second acquisition closed that way.
How does a seller note work with an SBA loan?
The note sits behind the bank loan and usually has to be on standby for some period. From October 1, 2026, seller notes and similar sources can cover no more than half of the buyer's required down payment on an SBA deal.
Do I still need a down payment?
On an SBA loan, yes. At least 10 percent of the project cost, and at least half of that has to come from sources the SBA doesn't treat as limited. Outside the SBA, some lenders will fund a buyer with no money down using investor money.
The seller note is rarely the biggest number in the deal. It's usually the one that decides whether there is a deal.
