Business Seller Financing (also called Owner Financing) is when the seller of a small business agrees to finance part or all of the purchase price, allowing the buyer to pay over time instead of requiring full payment upfront.
How It Works in a Small Business Sale
• The buyer and seller agree on:
• Total purchase price
• Down payment amount
• Loan term (e.g., 3-10 years)
• Interest rate (usually 5-10%, but negotiable)
• Payment structure (monthly, quarterly, etc.)
• The buyer typically makes a down payment of 10-50% of the business price.
• The seller finances the remaining balance and issues a promissory note detailing the payment schedule, interest rate, and default terms.
• The buyer makes regular payments to the seller, often with interest.
• The seller may secure the loan with:
• A lien on business assets (inventory, equipment, etc.).
• A personal guarantee from the buyer.
• Once the buyer pays off the full loan, the seller releases any liens or security interests.
Example of a Seller-Financed Business Sale
• Business Sale Price: $200,000
• Buyer’s Down Payment: $50,000 (25%)