Max seller financed % witnessed in market

April 03, 2021

by a searcher from Princeton University in New York, NY, USA

What is the highest percentage seller financed people have seen in the market?

What type of structures can these take? Can the payout be dependent on business performance as a way to derisk the purchase?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I have also seen 100% seller financed completed. I would not say that is usual, and usually there is a big trust factor when that takes place (like an owner selling to an employee or friend), but on occasion it happens with other deals. If the majority of the deal is seller financed and there is no lender, or the lender is largely secured by fixed business assets, there is a lot of flexibility to structure the seller note however you like so long as there is sufficient cash flow to support debt service for the primary lender. If there is a lender involved they will likely require the seller note to be subordinated to them, and will want the note structure on the seller note to be supported by cash flow and not setup in a way that it strains the business. I would say on the average transaction I see seller notes between 10% and 20% to ensure the seller assists with the transition and to provide some means to claw back on the seller should something not hold up with the transaction. If you are doing an SBA loan for the financing, there will be lots of restrictions on what you can put into the seller note. For the most part the full purchase price will need to be decided at closing, and although there can be clawbacks in the seller note it cannot be setup fully based on performance and future payments cannot be based on performance. I hope this helps. Feel free to reach out if you want to discuss in more detail at redacted

Reply by a searcher
from Hofstra University in Melville, NY, USA

I have effectively purchased businesses for 100% owner financing. There was some small cash at closing to cover closing related costs. There are a lot of ways to accomplish this depending on the business (like financing receivables of the acquired firm or giving those receivables back as a down payment.)

I would not bring it up on a first call, but you can get some valuable information by asking what they are going to do with the money or what their plans are after they sell, depending if you are working an Acqi-hire or not.

Typical structure for me would include 3 main pillars. Cash, Earn Out and a Note. I would vary the % of each based on the opportunity or provide different options. Typically I can bridge a reasonable gap using terms, where I would pay more if the seller would take some more risk based on performance.

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