Creative ways to structure seller notes?

October 03, 2025

by a searcher from Charles Sturt University in New Jersey, USA

I’m evaluating a small business deal with inconsistent performance over the past three years. The seller attributes this to family health issues that distracted them, though they present an optimistic outlook without real pipeline visibility. The business has proven potential since its best year produced strong revenue and SDE, but 2024 was a loss and 2025 has only partially recovered, still below 2023 levels. The seller, at retirement age, won’t agree to an earnout or forgivable note but wants to stay on as an employee for some time. They acknowledge the business is not financeable externally and are offering 50% seller financing. How can I creatively structure this financing to protect myself as buyer in weak years without using an earnout or forgiveness?

Reply by an intermediary
from The University of Chicago in Chicago, IL, USA

I have come up with many creative structures but they are situation specific. It needs more operational and non-operational details. Having said that, you can have Seller Note for the 50% but the payment schedule is performance contingent. The remaining amount of Note is due at time T, or it can be forgivable at T, or there are few other options for back-end. Happy to talk.

Reply by a professional
from University of North Carolina at Chapel Hill in Atlanta, GA, USA

^^some great thoughts above. Real Estate would be great. I would shift greater weight towards the seller's note. You could also shift a portion of payment to a % Gross Profit - it's not "forgivable", but still scales with the ups/downs. Also, keeping the seller on as an employee for a long period of time, especially with a substantial portion of the purchase price tied up in a seller's note, could create some difficult relational circumstances. Not a reason not to, but those seller dynamics post-close could be difficult.

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