In seller financing, the seller accepts part of the purchase price over time rather than all of it at closing. For buyers, it reduces the funded amount needed. For sellers, it widens the buyer pool and can support their price.
It's also a signal: a seller willing to carry paper is expressing confidence the business will perform under new ownership.
How a seller note fits the deal structure
A typical acquisition blends buyer equity, a funded portion (conventional or SBA), and possibly a seller note. Lenders often view seller financing favorably : the seller is effectively co-investing in the business's future performance.
Terms that need careful negotiation
- Interest and repayment schedule on the note
- Whether the note is subordinated to the funded portion (lenders usually require it)
- What happens to the note if the business underperforms
- Any performance conditions or earnout components tied to the price
When seller financing should raise questions
A seller refusing to carry anything isn't disqualifying : but a seller insisting on all cash at closing, for a business with thin documentation, shifts all transition risk to you. Weigh it alongside diligence findings, not in isolation.
Frequently Asked Questions
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If this topic relates to a funding need you have, you can begin a funding request through Kennify's financing partner at any time.