I am progressing well in discussions with a husband and wife who are selling their decades-old business and entering retirement. Yesterday they floated the idea of taking the entire debt portion of the transaction themselves as a way to generate a stable interest income stream after selling the business. This is a brokered deal and the intermediary is the one who raised the concept on their behalf without specifics, only the sellers' willingness to discuss replacing the debt I would have taken from a lender with their own note. My perception is that the sellers have a very strong financial position with a diversified portfolio independent of this business. They want a low-risk income stream addition to that portfolio and they trust that I can continue the 30+ year history of profitability with the business and easily cover the loan payments.

Up to this point, my financing plan has been to complete an acquisition using a structure of 15% to 20% personal equity injection, a 15% to 20% seller's note, and an SBA loan from one of the experienced ETA lenders that support this community. I had mentally discarded the concept of higher levels of seller financing as the wishful thinking of YouTube charlatans pitching their courses on how to "buy a company with no money down."

With the right terms, this could be attractive. What are the pitfalls of a 20% equity injection + 80% seller's note structure that I should consider? Do you have recommendations on elements of the terms and conditions I should pursue in the negotiation?