Looking for different ways to frame a PG for a seller's note

February 17, 2026

by a searcher from Northwestern University - Kellogg School of Management in Chicago, IL, USA

I am purchasing a business with a seller note financing component, and the seller has requested a PG. I will also be obtaining an SBA loan. I want to avoid using my primary residence as collateral for this transaction, and I have enough equity in other property to use as the SBA backer. This will be the sellers primary retirement income, so I can understand its importance for a sense of security, but also want to limit my exposure. Looking for different/creative ways folks have seen seller note PGs structured.

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Reply by a professional
from University of Michigan in Detroit, MI, USA

Hi ^redacted‌, on the one hand, the seller is loaning you money. And just like many lenders, wants to secure the loan with a PG. On the other hand, the seller note is not ordinary debt. It is a tool to align economic incentives--the seller has to work towards a successful transition, or else he or she risks losing the amount owed (if the business fails). First, paint the issue in this light.--the seller note is not ordinary debt. Second, if the seller insists on something more, offer a security interest on the assets of the business or with a pledge of stock. Third, if the seller is unhappy with the second option (your SBA lender will have priority after all), offer a limited guaranty. Rather than PGing the entire note, PG a percentage. That way, the seller still has skin in the game and you limit your exposure. Happy to discuss further. Feel free to reach out at redacted and we can schedule a time to talk.

Reply by an investor
from University of Oxford in Austin, TX, USA

This is a non-starter. A key aspect of the seller note is that the person who knows the business best is keeping skin in the game. Adding a PG eliminates this structure that keeps everyone honest.

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