Seller financing shows up in a large share of small business acquisitions, but most first-time buyers only have a vague sense of what it means or how much is reasonable to ask for. It's simpler than it sounds: the seller acts as a lender for part of the purchase price, getting paid over time instead of entirely at closing. The harder part isn't understanding the concept. It's knowing what to actually propose.
Why sellers agree to carry a note at all
It's a fair question: why would a seller wait to get paid? A few real reasons:
- It often gets the deal done at all. Many buyers can't finance 100% of a purchase price through a bank alone. A seller note bridges that gap.
- It signals confidence. A seller willing to carry paper is implicitly betting on the business (and on you) continuing to perform, which banks read as a positive signal too.
- It can support a better overall price. A seller who wants a higher headline price may accept part of it as a note rather than losing the deal over an all-cash requirement they can't get met.
- SBA loans sometimes require it. Depending on the deal structure, a seller note on standby can be part of how the required equity injection gets satisfied.
Typical seller-note ranges
There's no fixed rule, but seller notes commonly land somewhere in the range of 5-20% of the purchase price, with the rest split between the buyer's equity injection and senior (usually SBA) debt. Larger notes, sometimes covering a much bigger share of the price, do happen, typically when the seller is especially motivated to see a successful transition rather than maximize cash today.
The note's terms usually get negotiated alongside its size: interest rate, repayment period (often 5-10 years), and whether it goes on "full standby" (no payments for a period, common when it's counted toward the equity injection for an SBA loan). Interest rates on seller notes are often somewhat below what a bank would charge, since the seller is weighing "get the deal done at all" against "maximize the return on this note," but treat that as a starting point for negotiation, not a rule either side is bound by.
It's also worth understanding that a seller note in an SBA-financed deal is almost always subordinated to the bank loan, meaning if things go badly, the bank gets paid first. Sellers who understand this upfront tend to negotiate more realistically than ones who find out partway through the process.
What affects how much a seller will carry
A few factors move the number in practice:
- The seller's own liquidity needs. A seller retiring with other savings has more flexibility to carry a note than one who needs the cash from this sale to fund their next step.
- How competitive the process is. In a broker-run auction with multiple offers, which is how most listed online businesses get sold, sellers have less reason to accept a large note. In a direct, relationship-driven deal, they often have more.
- Buyer credibility. A buyer with relevant industry experience, a clear transition plan, and a track record the seller can verify is an easier "yes" for a seller than an unknown first-time buyer asking for the same terms.
- Deal size and industry risk. Larger deals and higher-risk industries tend to see smaller seller notes as a share of price, since the absolute dollar exposure for the seller grows quickly.
How to actually ask
Frame the ask as shared risk, not a favor: you're proposing that the seller's payout is partly tied to the business continuing to perform under your ownership, which is a reasonable thing to ask precisely because it aligns both sides' incentives. Come with a specific number and term already anchored to what your lender needs (interest rate, standby period, subordination to the senior loan), rather than asking the seller to name a figure first. It's easier for them to react to a concrete, reasonable proposal than to generate one from scratch.
Timing matters too. Raising seller financing as a late add-on after terms are otherwise agreed tends to land worse than building it into your very first offer, framed as part of how you're structuring a fair deal for both sides rather than a shortfall you're trying to patch. A seller who hears about the note request early, alongside your broader plan for the business, has time to get comfortable with it. One who hears about it at the eleventh hour reasonably wonders what else is being asked for.
Next: once financing is roughly mapped out, it helps to know what businesses at different price points actually tend to cost relative to their earnings.