The short answer: a seller note is the owner lending you part of the purchase price and getting paid back over time. It lowers your cash to close, keeps the seller invested in a smooth handoff, and, on the right terms, can count toward your SBA equity injection. Ask for it as a sign of a partnership, not a discount, and tie it to the transition the seller already wants.
What a seller note actually is
Instead of the seller getting every dollar at closing, they carry a portion as a loan. You sign a promissory note and pay it back with interest over a set term. For the buyer, that is less cash up front. For the seller, it is often a higher effective price and a steady income stream. It also sends a signal to your lender and to you: the seller believes the business can pay them back.
How seller notes work under SBA rules
On an SBA 7(a) acquisition, a seller note can help satisfy part of the required equity injection, but only when it is on full standby, meaning the seller receives no principal or interest for a set period (commonly the first two years) so the SBA loan sits in first position. A note that is not on standby is still useful for lowering your cash, it just does not count the same way toward the injection. Always confirm the current treatment with an SBA-preferred lender, because the rules get updated.
| Source | Amount | Role |
|---|---|---|
| SBA 7(a) loan | $900,000 | Senior debt, ~90% |
| Seller note (full standby) | $50,000 | Can count toward injection |
| Buyer cash | $50,000 | The real floor, ~5% |
Terms worth negotiating
- Size. Often 5% to 15% of the price, sometimes more on a motivated retirement sale.
- Standby period. Full standby unlocks the SBA injection benefit; partial standby still helps cash flow.
- Interest rate and term. Reasonable rate, amortized over several years, so the payment does not choke your DSCR.
- Security. The lender takes first position; the seller sits behind them.
How to frame the ask
Do not open with "will you finance it because I am short on cash." Frame it around the transition the seller already cares about. A seller note keeps them tied to a clean handoff, signals your confidence, and often gets them a better total price than an all-cash lowball. Position it as aligning both sides for the first two years, which is exactly the window where most ownership transitions succeed or struggle.
Do not over-lean on it
A seller note is a tool, not a way to buy a business you cannot otherwise afford. If the deal only works because the seller is carrying most of the price, the underwriting is telling you the price is too high. Make sure the deal still covers its debt with room to spare.
The best seller notes are not a discount you extracted. They are a partnership the seller wanted anyway.
Frequently asked questions
It can count toward the required equity injection when it is on full standby, meaning the seller receives no principal or interest for a set period so the SBA loan stays in first position. Confirm the current rule with an SBA-preferred lender.
Often 5% to 15% of the purchase price, though a motivated retiring owner may carry more. The right size is the amount that lowers your cash to close while still leaving the deal comfortably covering its debt.
A seller note often gets them a higher total price, spreads their tax hit, produces steady interest income, and keeps them invested in a smooth transition. It also signals to the lender that the seller believes in the business.
Sources
- SBA SOP 50 10 equity injection and standby rules, sba.gov SOP 50 10.
- SBA Form 155 standby agreement, sba.gov Form 155.
- Choosing an SBA-preferred lender, Acquisition Ace lender guide.
Keep reading
The Real Math of "No Money Down"
Where the seller note sits in the full capital stack.
Read → SBA News2026 SBA Rule Changes
The current injection and standby requirements.
Read → LearnDeal Structures
Earnouts, notes, and how deals get built.
Guide → Free ToolDSCR Calculator
Check the note still leaves you covered.
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