How Much Seller Financing Will I Have to Carry?

It's a plumbing company, and the offer lands in the middle of a January freeze-up when every truck is out on burst pipes. His first thought is that the buyer isn't really funded.

The buyer was funded. The buyer's lender just wanted the seller to share the risk on a business where the owner personally priced every replacement job.

What the note really is

How much seller financing you'll carry depends on how risky your earnings look without you. There's no fixed market percentage behind it. The note is the price a buyer and their lender put on the chance the business slides after you leave, so its size says a lot more about your business than about the buyer's bank account.

Sellers hear a percentage and treat it like the way things are done. But it's negotiated, and it swings a lot between two businesses of the same size in the same trade.

The buyer's lender is the loudest voice in the room. SBA 7(a) lending runs at a median term of 120 months and an FY2025 median rate of 9.50%, with 84.4% of loans carrying variable rates. That lender is underwriting a decade of exposure, and it prices caution to match.

So read the note as feedback. A term you can't touch is just a fact, but a price on risk is a to-do list, and that's what makes the number movable.

What moves it

Four things. You control three of them.

• Owner dependence. The biggest input by far. If you price, quote, and decide everything, the business gets priced like it might not survive the handover.
• Records quality. Three years of clean, separated statements shrinks the note more reliably than almost anything else. It's also the slowest to fix.
• Customer concentration. A big account the seller holds personally raises the note, because the lender is underwriting that account walking.
• The buyer's lender terms. Their appetite, their program, their read of the trade. You work around this one.

The plumbing owner's note (12 people, about $2.6M in revenue) was sized almost entirely by the first one. His replacement quoting lived in his head, and diligence made that obvious.

Dependence hits the headline price too, so you pay for it twice: once in the price and once in the carry.

And that risk usually doesn't get found in the financials. Buyers talk to your employees, and the note gets sized after those conversations.

Why saying no to any note usually backfires

The instinct is to demand all cash. Sellers who hold that line often end up with a lower total price.

Two reasons. First, a seller who won't carry anything is telling the buyer they don't expect the business to perform without them, which is the exact fear the note is there to answer. Second, pulling the seller note pulls the buyer's cheapest capital, so they offer less, walk, or come back with an earnout that's worse for you in almost every way.

A modest note from a confident seller reads as confidence. That's rare in these talks, and it's worth real money at the top line.

(None of this is legal or tax advice, and the documents are for your own counsel. This is the operating logic behind the number.)

As for that earnout alternative, it's usually worse. Earnouts put the performance risk on you with a lot less control than a note gives you.

Negotiate the terms, not the size

Once you accept there'll probably be a note, the size is the least interesting part. Four other things decide how the next few years feel.

Term first. A shorter note with a slightly bigger balance usually beats a long one, because your exposure ends sooner. Then security and standstil terms, which decide what you can actually do if payments stop. Then the triggers: what counts as default and what happens next.

Rate goes last. Sellers argue about it first and it's the thing that moves the total least, worth less than the term and far less than the security.

All of it is laid out in seller financing terms. Read that before the first counteroffer. And since a lot of the structure comes from the buyer's lender, SBA 7(a) requirements explains the limits your buyer can't negotiate away either.

The most direct way to shrink the note is to get rid of the dependence before you list. For a worked example, see getting techs to quote a replacement the way you would. Same problem the plumbing owner had.

Before you list

Ask your broker or your buyer which specific risk the note is pricing. The answer is your work list, and most of it can be fixed in the quarters before you list.

Keystone is closed right now while the build finishes, so there's nothing to run yet. When the diagnostic opens, it's 18 questions and about four minutes, and it returns three scores and your value range with the most likely figure locked, calibrated against 10 years of BizBuySell Insight Reports and 1.6M+ SBA 7(a) loan records. That's how you'll see the risk before a lender does.

The waitlist is at https://app.trykeystone.io.

One reading tells you what's driving the risk today. Tracking it across the quarters before you list is how the note shrinks, and the paid tier keeps that record. Current tiers and what's in each are on the pricing page.

FAQ

How much seller financing does a small business sale typically require?

It depends on how risky the earnings look without the owner rather than on a fixed market percentage. The note is the price a buyer and their lender put on the chance the business declines after the seller leaves, so it varies widely between similar businesses.

Do I have to finance the sale of my business?

Usually some, and refusing entirely often lowers the total price rather than raising the cash. A seller unwilling to carry anything signals that they do not expect the business to perform without them, which is exactly the fear the note exists to answer.

What makes a seller note larger?

Owner dependence first, then records quality and customer concentration, plus the buyer's lender terms which you cannot influence. The first three are all fixable in the quarters before you list.

What should I negotiate if I have to carry a note?

Term, security and standstill terms, and the default triggers, roughly in that order. The interest rate is what sellers argue about first and it moves the total least.