Financing
Seller Financing
The seller acts as the bank. You make payments directly to them instead of a lender. One of the most powerful tools in both real estate and business acquisitions.
How It Works
Instead of borrowing from a bank, you negotiate directly with the seller to carry the financing. The seller receives monthly payments (principal + interest) over an agreed term. They get income and you get a deal without traditional lending constraints.
In real estate, this often involves a promissory note and deed of trust. In business acquisitions, seller financing is extremely common — often a sign the seller is confident the business will support the debt. SBA lenders frequently require it as a signal of seller confidence.
When Sellers Agree to It
- • They want income, not a lump sum — common with retiring sellers
- • The property or business doesn't qualify for conventional financing
- • They want to spread capital gains tax over time
- • They can't find a qualified conventional buyer
- • They care about who takes over and want the deal to close cleanly
Typical Terms
- • Rate: 5–8% depending on asset and negotiation
- • Term: 3–10 years with balloon payment common
- • Down payment: 10–30% typically
- • Amortization: Often 20–25 years with 5–7 year balloon
- • Security: Deed of trust (RE) or UCC lien + pledge of equity (business)
What to Watch For
- • Due-on-sale clauses in existing mortgages (for real estate)
- • Balloon payment timing — ensure you can refinance or sell before it hits
- • Seller's tax situation — some sellers don't fully understand the implications
- • Get it properly documented with a real estate attorney or business attorney
Exploring seller financing on a deal? Let's structure it so it works for both sides.