Seller Financing: What It Is and When to Offer It

What Is Seller Financing?

Seller financing (also called owner financing) is when you, the seller, act as the lender for part of the purchase price. Instead of the buyer obtaining 100% of funds from a bank, you accept a promissory note and receive payments over time — typically at a higher interest rate than a bank would offer.

A common structure: buyer pays 60–70% at closing (via cash or SBA loan), and you hold a note for the remaining 30–40% over 3–7 years.

Why Sellers Offer It

1. More buyers: Many qualified buyers can't access full financing. Offering seller financing expands your buyer pool significantly.
2. Higher sale price: Sellers who offer financing often achieve 10–20% higher prices than all-cash sales.
3. Tax advantages: Installment sales can spread capital gains tax over several years.
4. Faster closings: Eliminating full bank underwriting speeds up the process.

The Risks to Understand

Seller financing carries real risk — if the buyer defaults, you may need to take the business back. Mitigate risk by:

• Requiring a substantial down payment (20–30% minimum at closing).
• Conducting your own buyer due diligence — evaluate their financial strength, experience, and track record.
• Securing the note with a lien on business assets.
• Including personal guarantee provisions in the promissory note.

When It Makes Sense

Seller financing is most appropriate when:

• You have a strong business that's difficult to finance via traditional SBA loans.
• You're willing to accept some deal structure in exchange for a higher price.
• You're confident in the buyer's ability to operate and grow the business.
• You want installment sale tax treatment.

Work with a Professional

Structuring seller financing correctly requires experience. Bridge Point has helped sellers navigate hundreds of creative deal structures. Contact us to discuss whether seller financing is right for your situation.