Most buyers treat seller financing like a favor they are hoping the seller will grant.
That framing will cost you deals.
Asking a seller to carry a note is not a request. It is a presentation. You are showing the seller why financing a portion of the deal is in their interest, not the other way around. When you frame it right, with the right numbers at the right time, most sellers say yes. Here is how to do it.
Why Sellers Agree to Finance Deals
Before you think about how to ask, you need to understand why a seller would agree in the first place.
The short answer: it is usually better than the alternative.
A seller carrying a note on a $1.5M business sale might receive $50K to $150K of the purchase price paid back over time. That sounds like a downside until you look at what they get in return: a higher sale price than an all-cash deal would produce, interest income, and a buyer who is motivated to keep the business healthy because the seller is still owed money.
Compare that to a buyer who shows up with a lower all-cash offer. The math often favors the note.
There is also a tax angle worth understanding. Sellers receiving proceeds over multiple years through an installment sale can spread the capital gains recognition across those years rather than taking the full hit in year one. Your CPA and their accountant should work through this together, but it is a real incentive.
In the right situation, seller financing becomes more attractive than a lump sum at close. Position it correctly and it is a feature, not a workaround.
When to Bring It Up
Timing matters more than most buyers realize.
Do not raise seller financing on the first call. That first call is about building rapport, understanding the business, and showing the seller you are a serious operator who has done real homework. If you lead with “would you be willing to carry a note,” you signal that you cannot fund the deal yourself. That is not the impression you want to leave.
Bring it up after you have established credibility and after you have a reasonable sense of the deal economics. The right moment is typically when you are moving toward a letter of intent (LOI). You have reviewed the financials, you know the deal can work, and now you are structuring the offer.
That is when you present seller financing as part of the deal structure. Not as a desperation move.
How We Structure Seller Notes at Regalis
In the context of SBA 7(a) acquisitions, seller notes follow a very specific structure.
On most deals we run, the seller note is structured at 10-year full standby with 0% interest. We achieve that structure on more than 90% of our deals. Full standby means the seller receives no principal or interest payments during the standby period. When an SBA loan is in place, the lender requires the seller note to be on standby for the duration of the SBA loan (which is typically 10 years, and yes, that means the seller is waiting a long time to see that money). The seller does not collect a check until the SBA loan is paid off or the standby period ends.
Zero percent interest is not standard in every deal. We negotiate it because we present the structure as part of a broader offer where the seller benefits from the total deal terms, including purchase price and certainty of close.
On a $1.5M deal with a 10% seller note, that is $150K the seller is not receiving at close. In exchange, they get a higher headline price, a buyer with SBA backing, and a faster path to closing because the buyer is not scrambling for another financing source. Worth understanding before you have the conversation.
How to Ask Seller for Financing: The Actual Conversation
Three things need to be true before you open this conversation.
First, you have reviewed the financials and the deal works at the proposed structure. Do not ask for seller financing on a deal you have not run the numbers on. Second, you are presenting this as part of a complete offer, not as an afterthought after the seller rejects your price. And third, you understand the seller’s situation well enough to know what outcome they are optimizing for. Retirement with steady income? Fast exit? Tax efficiency? Clean break? The answer shapes how you frame the note.
When you are ready, here is how the conversation goes.
You present the offer. You walk through the purchase price, the financing structure, the timeline, and the deal certainty that comes with SBA backing. Then you say something like this:
“To make this deal work at the price you are looking for, I need a small portion of the purchase price to be carried as a seller note. In exchange, you get [X], and I can move faster on closing because we are not adding another financing contingency. The note sits behind the SBA loan, which means it is secured against the business and you have a motivated buyer keeping the company healthy for the next decade.”
You are not asking for a favor. You are presenting a structured deal and explaining the terms clearly.
If they push back, the most common objection is that they want all their money at close. Address it directly: “I understand. Here is why the total economics still work in your favor.” Then walk through the math. No hedging. Just the numbers.
The Numbers That Make Seller Financing Work
Say you are looking at a landscaping company doing $800K in revenue and $280K in seller discretionary earnings (SDE).
Side note: SDE is unreliable as a standalone metric. You always want to discount it 15% to 50% depending on what proof of cash shows. For this example, assume you have done that work and the discounted cash flow comes in around $210K to $240K. That is the number you actually use for debt service modeling. Not the raw SDE.
So the seller is asking $840K, which is a 3x multiple on the reported SDE. At $840K with an SBA 7(a) loan at 10% down, your equity injection is $84K. Your SBA loan is roughly $756K. At current SBA rates on a 10-year term, your annual debt service comes in around $110K to $120K. Against a discounted cash flow estimate of $210K to $240K, your debt service coverage ratio (DSCR) sits somewhere around 1.75x to 2.2x, depending on where the real cash flow lands. That range can clear underwriting, but the spread matters.
Now the seller wants $900K. At $900K all-in on an SBA loan, you are looking at debt service closer to $130K. Your DSCR starts compressing. If your real cash flow is on the lower end of that range, you are getting dangerously close to the floor.
Here is where the seller note creates structure that works for both sides. You offer $900K with a $90K seller note on full standby. The SBA loan drops back to $810K. The debt service on the SBA portion stays manageable. The seller gets their $900K price. You keep enough cushion in the DSCR to satisfy the lender.
The seller note in this scenario is what makes the deal possible at the seller’s price.
Common Seller Objections and How to Handle Them
“I need all my money at closing.”
This is the most common objection by a wide margin. Ask what is driving that need. Sometimes it is a specific liability they are paying off or a retirement purchase they are funding. If you understand the underlying need, you can often address it. Many sellers realize the specific need can be met from the closing proceeds even with a note in place.
“I have heard seller notes are risky.”
They are not riskless. But they are also not unsecured. The note is collateralized against the business. The buyer has equity in the deal. The SBA lender has already underwritten the business as viable. Walk the seller through those protections and compare it to the alternative: a buyer with no skin in the game or no deal at all.
“My attorney said not to do seller financing.”
Ask them to get their attorney on a call with your attorney. Generic legal advice against seller financing usually comes from advisors unfamiliar with SBA deal structures. A real estate attorney or an estate attorney who has never seen an SBA acquisition will reflexively tell sellers to avoid seller notes. A transactional M&A attorney who works these deals knows how common and how workable they are.
“The other buyer offered all cash.”
Ask for 72 hours to sharpen your offer. Then review whether you can increase the cash at close while keeping the note small. If the all-cash offer is real and competitive, you may not win this one. But in our experience, many all-cash offers do not survive due diligence and financing. Sellers who have been through a broken deal before know this.
So that covers how to handle pushback. The next piece is making sure the structure actually lands in writing.
What to Put in the LOI
Once the seller agrees to the note, it needs to be captured clearly in the letter of intent before you move into due diligence. Vague terms at this stage create problems later.
Your LOI should specify:
- The total purchase price
- The amount of the seller note (dollar amount and percentage of purchase price)
- The standby period (10-year full standby if SBA)
- The interest rate (0% if negotiated)
- Whether the note is secured and by what
- Any conditions on the note (for example, what happens if the business is sold during the standby period)
- Working capital requirements, including the amount the buyer expects to have available at close (generally 2 to 6 months of operating expenses, and this is non-negotiable)
That last point catches a lot of buyers off guard. Working capital is separate from the purchase price, separate from the seller note, and separate from the equity injection. It is money you need in the business on day one to cover payroll, vendor payments, and operating costs while revenue normalizes post-close. If your LOI does not address working capital, you will end up in a fight about it during closing, and that is the worst possible time to have that conversation.
Do not leave any of these terms vague and hope to sort them out during the asset purchase agreement (APA) drafting. Sellers who agree in principle to a note often get cold feet when they see the specific terms in legal documents, especially if those terms were never clearly established upfront.
Lock in the structure early. Your attorney handles the language. You handle the relationship.
Frequently Asked Questions
How to ask a seller for financing without seeming like you can’t afford the deal?
Frame the seller note as part of deal structure, not a cash shortage. Present it during the LOI stage as one component of a complete, well-organized offer. Sellers who have worked with serious buyers understand that structuring deals with seller notes is standard in SBA acquisitions, not a sign of financial weakness.
What percentage of the purchase price can a seller note cover in an SBA deal?
SBA 7(a) loans typically allow seller notes to cover up to 5% to 10% of the purchase price when the note is on full standby. The buyer still needs the minimum 10% equity injection in cash or eligible sources. The exact percentage varies by lender, so confirm with your SBA lender early in the process.
Is seller financing the same as an earn-out?
No. A seller note is a fixed obligation: the buyer owes the seller a specific dollar amount regardless of how the business performs. An earn-out is contingent on hitting certain revenue or earnings benchmarks post-close. Both structures defer some of the seller’s proceeds, but they carry different risk profiles and different implications for the buyer.
What happens to the seller note if the business is sold before the standby period ends?
That depends on the note terms negotiated at closing. In most SBA deals, the seller note is paid off in full at the time of a future sale or refinance. This is called an acceleration clause and is typically included in the promissory note. Make sure your attorney addresses this clearly in the deal documents.
How long does it take to negotiate seller financing terms with a seller?
In most deals, the seller note structure is agreed on in principle within one to three conversations before the LOI is signed. The legal documentation follows during the 45 to 90 day due diligence and closing period. The harder work is that initial conversation, which is why preparation and framing matter so much.
Thinking About Acquiring a Business?
Regalis Capital runs a done-for-you acquisition advisory service for serious buyers. We find the deal, run the debt service models, negotiate the seller note structure, and manage the SBA process from LOI to close.
We have achieved 10-year full standby seller notes at 0% interest on more than 90% of the deals we have closed. That does not happen by accident. It happens because the structure is presented correctly from the first offer.
If you are ready to move seriously on an acquisition, start here.