How to Structure a Seller Financing Deal When Buying a Business
Good seller financing deals work for three parties: the buyer, the seller, and the lender. Here's how to put one together.
1. Start With the Cash Flow
Take the business's adjusted cash flow (SDE or EBITDA) and subtract a fair salary for yourself. What's left must cover the senior loan payment and the seller note payment with room to spare. Lenders typically want debt-service coverage of about 1.25x or better.
2. Size the Seller Note
Use the note to bridge the gap between the price and what the lender will fund. If a lender will finance 80% and you have 10%, ask the seller to carry the remaining 10%.
3. Decide How It's Repaid
- Full standby if the note counts toward an SBA down payment
- Monthly amortizing if it's a gap-filler and cash flow allows
- Interest-only then amortizing to ease the first year
4. Put It in the Letter of Intent
Spell out the note amount, rate, term, standby, and subordination in the LOI. Surprises at closing are the most common way seller financing falls apart.
5. Get Your Lender Involved Early
Share the structure with your lender before you sign the purchase agreement, so the seller note fits SBA and lender rules.
Finding Businesses for Sale With Seller Financing
- Filter business-for-sale listings for "seller financing available"
- Ask brokers which sellers are open to carrying a note
- Target retiring owners who care about legacy and steady income
- Offer a slightly higher price in exchange for better note terms
Learn more in our guide to buying a business and seller financing basics, then test the numbers in the acquisition calculator.
Figures reflect general SBA program guidelines and typical market practice. Requirements, rates, and timelines vary by lender and deal, and every loan is subject to underwriting and approval.
Related SBA guides: SBA 504 Loans Explained · SBA 7(a) vs 504 · SBA Working Capital Loans · SBA Loan Timeline · SBA Loan Denied? · Cash to Close & Fees · Rates & Prepayment · Underwriting & Guarantees
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