Sellers Note negotiation

April 06, 2026

by a searcher in Idaho Falls, ID, USA

I've scoured this site for the sellers note convos and I got some really good info. I have some terms from a seller that I'd like to negotiate and thought a few of you on here have some really good experience in this. I'm running an SBA 7a. I'm coming in with equity. Enough to cover SBA 10% (probably more like 18%). I also asked for the seller to carry 20% fully differed for 24 months, amortized at 10 years. Payments start year 3 principal plus interest. Interest rate negotiable but at some kind of discount to SBA. I wanted this to give me some breathing room on debt. They came back with 20% amortized over 15, Interest only for two years at 8%, with a ballon after two years. Seller is older and really just wants to get his money and get out. So I totally understand his perspective. It's the balloon of 20% that I'm stuck on. So I'm thinking it would be better to ask for less of a note. 10 or 15 percent with interest only for 24 months, no balloon but I'll amortize that out over 5 or 7 years. Is this reasonable and common?

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

It sounds like you have a seller willing to negotiate some. As for the balloon, we build seller note balloons into many of the SBA acquisitions we help fund. We often find older sellers who do not want to wait 10 years to get paid. However, if you have that seller note balloon prior to usually four years, most lenders really worry about the balloon and some will include it in the debt service for the first couple of years, which will kill cash flow. I usually recommend not having a balloon before year 5. The nice thing is even if it balloons at year 5, you are still somewhat in the driver seat if you do not have the funds to immediately repay it as the seller note is still fully subordinate to the senior SBA lender. Also, most lenders will provide you with fresh SBA debt to take out the seller note at that balloon date as well. If you need help negotiating structure, we would be happy to work with you. You can reach me here or directly at redacted Good luck with your negotiations.

Reply by a lender
from California State University, Sacramento in Seattle, WA, USA

Balloons are common and I like the approach you’ve arrived at. BUT I don’t know anything about the opp. What needs to be mitigated? What’s the industry? Any seller dependency? Customer concentrations? Etc. happy to talk about the big picture to make sure you’re covering all the nuances. Those details will drive structure. redacted

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