A seller note is a form of seller financing where the seller lets the buyer pay part of the purchase price over time, with interest, instead of all at closing. It's essentially a loan from the seller to the buyer, documented with a promissory note, and typically covers 5%, 25% of a small-business deal. Because a seller willing to carry paper is betting the business keeps performing, buyers see it as a signal of confidence.
A worked example
| Component | Amount | Note |
|---|---|---|
| SBA 7(a) loan | $800,000 | Repaid first (senior) |
| Seller note | $100,000 | Repaid over time with interest (subordinate) |
| Buyer equity injection | $100,000 | 10% down |
| Total | $1,000,000 |
The seller gets $900,000 at close and the remaining $100,000 plus interest over the note's term.
A seller note says: "I believe in this business enough to get paid later."
Seller notes and SBA loans
A seller note usually sits behind the SBA 7(a) loan, the bank is repaid first. If the note is on full standby (no principal or interest for at least 24 months, documented on SBA Form 155), it can count toward up to half of the required 10% equity injection. See the mechanics in seller notes on full standby and how it can count as your down payment.
Why sellers agree to it
- Closes the deal, bridges a price or financing gap.
- Earns interest, the seller becomes a lender.
- Signals confidence, carrying paper backs up the seller's numbers.
- Spreads taxes, the seller may recognize gain over time.
Explore the full picture in our seller financing guide.
Frequently asked questions
Seller financing where the seller lets the buyer pay part of the price over time with interest, documented with a promissory note, often 5 to 25% of a small-business deal.
It sits behind the SBA loan. On full standby (no payments 24 months, Form 155) it can count toward up to half the 10% equity injection.
It closes deals, earns interest, signals confidence in the business, and can spread the seller's tax over time. Buyers value it as a sign the seller stands behind their numbers.
