Plain-English explainer

What is a seller note? The seller helps finance their own sale.

A seller note means the seller lends you part of the purchase price and gets paid over time instead of all at closing. Done right, it lowers your cash need and makes the bank more comfortable. Done wrong, one paragraph of it costs you the loan. Plain English below.

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Free 30 minutes. Bring a term sheet if you have one and leave knowing if it holds. Reviewed against the July 2026 rules.

The plain definition

Part of the price, paid over time

Instead of taking the whole price at closing, the seller carries a slice of it as a loan you repay over a few years, with interest. In business purchases a seller note commonly covers a meaningful minority of the price, sitting behind the bank loan in line for repayment.

Sellers agree for practical reasons: it gets deals done at their price, it can spread their tax bill across years, and buyers read it as the strongest signal there is, because a seller who refuses any note is telling you what they think of the business you are about to buy.

Why banks like it

Skin in the game, on both sides

A seller with money still in the deal answers the phone in month three. Banks know this, so a reasonable seller note makes a file stronger, not weaker. It also bridges valuation gaps: the bank funds what the earnings support, the seller carries the stretch, and the buyer is not scraping accounts to close.

The standby rules

Where one paragraph decides the deal

Here is the part buyers learn the expensive way. If the seller note is on full standby, meaning the seller receives no payments while the SBA loan is outstanding, it can count toward part of your required down payment. If the note quietly allows interest payments or early repayment triggers, it does not count, and the bank recalculates your injection late in underwriting, when the diligence money is already spent.

Banks read standby language line by line. So do we, before the offer goes in. The rest of the down payment math lives in how much you can borrow.

Negotiating one

What to watch on both sides of the table

Buyers: watch the rate, the term, what happens if the business hits a rough quarter, and whether the note is secured against anything that collides with the bank. Sellers: a note makes your business dramatically easier to sell, and the preparation that makes a buyer’s loan sail through starts a year before listing: see making your business loanable.

What is a seller note in buying a business?

The seller lends the buyer part of the purchase price and is repaid over time with interest, standing behind the bank loan. It commonly covers a meaningful minority of the price, lowers the cash a buyer needs at closing, and signals the seller’s own confidence in the business.

Does a seller note count as my down payment?

Part of it can, only if the note is on full standby: the seller receives no payments while the SBA loan is outstanding. The exact wording is checked line by line, and a note that allows any payments along the way does not count toward the injection.

What interest rate does a seller note carry?

It is negotiated between buyer and seller, typically landing near or below bank rates, with the bank reviewing the terms so the payments do not strain the business. The rate matters less than the standby language and what happens in a rough quarter.

Your seller note, read line by line

Have a note on the table already?

Thirty minutes, free. Send the terms ahead and we will tell you whether the standby language holds, what the bank will say, and what to push back on.

Talk through your deal

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