Why would an owner finance their own sale?

Chapter 1

The bank said yes, to part of it

Kim did get a loan. Her bank approved an SBA 7(a) loan for most of the price. Then it told her what it would not do: lend her all of it.

The bank wants Kim to have her own money in the deal. The SBA calls it an equity injection. Kim has savings. She does not have enough to cover the whole injection and keep a cushion for payroll.

90%of buyers expect seller financing to play a part, while only 29% of owners plan to offer it (BizBuySell, Q2 2026)

Under SBA SOP 50 10, a 7(a) loan that funds a complete change of ownership requires the buyer to inject at least 10% of the total project cost. The bank will not fund that 10%. It has to come from the buyer, or partly from the seller.

That is the answer to Walt's question. The buyer did get the loan. The seller note fills the gap between what the bank will lend and what the buyer has in cash. It is not instead of the bank. It is next to it.

Chapter 2

It is not instead of a loan, it is next to one

Marcus reading the standby note at the shop counter before opening, the chairs empty behind him

Example only, with made-up numbers. Northside sells for $220,000, and for simplicity that is the whole project cost. The bank requires a 10% injection, $22,000.

Kim puts in $11,000 cash. Marcus carries a note for $22,000 on full standby. The bank lends $187,000. Marcus gets about $198,000 at closing, before his own costs.

Standby means Marcus receives no payments on his note while the SBA loan is outstanding. Under SBA SOP 50 10, a seller note can count toward up to half of the buyer's injection only if it is on full standby for the life of the SBA loan. The bank is paid first.

Half of Kim's required injection, $11,000, can come from Marcus's standby note. Her $11,000 covers the other half. The rest of his $22,000 note is simply more of the price he is carrying.

So Marcus's note is a loan with a lender ahead of it. He waits for his $22,000, with interest, until the bank is paid. Ask the buyer's lender early how it will treat your note, because the SBA revises these rules.

$11,000 buyer cash
$187,000 SBA bank loan
$22,000 Marcus's note on standby

Made-up $220,000 sale with an SBA loan.

Chapter 3

What Marcus gets for it

Walt's follow-up was the obvious one. What is in it for the seller? Marcus had asked his accountant the same thing a month earlier, and had four answers.

A buyer who can close

Kim can close with her savings, the bank and the note together. Without the note, she cannot. The note turns a buyer who wants the shop into one who can pay for it.

Often a better price

Morgan & Westfield says businesses sold with seller financing bring 20% to 30% more than all-cash sales. The firm gives no dataset for that, so treat it as a broker's judgment, not a rule.

Interest on the note

Morgan & Westfield reports rates on seller notes have ranged from 6% to 8%. Marcus's note earns interest while it waits, which a cash sale would not.

A say in who takes over

Part of Marcus's money rides on Northside's next five years. That gave him a reason, and the standing, to ask who would run it and how. He chose Kim.

Chapter 4

What Marcus asked for

Kim behind the first barber chair as the new owner, Marcus watching from the doorway

Marcus did not agree to carry paper on a handshake. He wrote down his floor before Kim made an offer, and his attorney turned it into the documents.

If the SBA loan had fallen through, his floor was 20% of the price in cash at closing, from Kim. That is lower than the 50% or more Morgan & Westfield says many sellers want when they finance alone. Marcus knew that, and chose his own floor.

"I'm not lending Kim money because I'm nice. I'm lending it because the bank won't lend all of it, and she's the one I want in that chair."

Walt's last comment was that it sounded like a lot of paperwork for a favor. Marcus's answer: it is not a favor. It is a loan, and loans come with paper.

A real down payment: 20% in cash at closing with no bank loan, and the full SBA injection with one.
A personal guarantee from Kim, so she stands behind the note, not only the new company.
A security interest in Northside's assets, filed as a UCC lien after closing.
A five-year term, which Morgan & Westfield reports as the average for seller notes, with the rate written in the note.
Quarterly financial statements for the life of the note, so he sees a slow month before he sees a late payment.
Every document drafted by his own attorney: the note, the security agreement and the guarantee.

What to do instead

It widens the buyer poolNine in ten buyers expect some seller financing (BizBuySell, Q2 2026). Saying yes to a note, on your terms, puts your listing in front of buyers who can actually close.
List with your terms up front
It is a loan with paperwork, not a favorA promissory note, a security agreement and a personal guarantee, drafted by your attorney. Interest at a rate you both agree to.
Decide your floor cash at closing firstWork out what you need on day one. That sets the smallest down payment you can take and the largest note you can carry.
Start with the free calculator
Get it paperedNothing moves on a handshake. Your attorney drafts every document, and the buyer's lender tells you in writing how your note will be treated.

Sources

BizBuySell, Insight Report, Q2 2026: Financing Becomes a Major Deal HurdleQ2 2026, archived copy checked October 18, 2026 · Survey of owners, buyers and brokers; sample size not stated on the pageStates that 90% of buyers expect seller financing to be part of their acquisition strategy, while 29% of owners plan to offer it, almost half say they will not, and 23% are undecided. Also reports owner priorities in a sale: 34% a fast, low-stress sale, 30% business continuity and employee well-being, 30% the highest price. The live page shows the latest quarter, so the link is an archived copy of the Q2 2026 edition.
US Small Business Administration, SOP 50 10: Lender and Development Company Loan ProgramsVersion 8 effective June 1, 2025; version 8.1 effective October 1, 2026For a 7(a) loan that funds a complete change of ownership, the buyer must inject at least 10% of total project cost. A seller note can count toward up to half of that only if it is on full standby (no payments) for the life of the SBA loan. SBA revises this SOP; confirm the current rule with the lender.
Morgan & Westfield, Seller Financing (The Art of the Exit, chapter 3)Checked October 18, 2026 (page undated) · None. This is a brokerage firm describing market practice, not a dataset.States that seller notes average five years and vary from three to seven, that interest rates on them have ranged from 6% to 8%, and that notes are often 10% to 40% of the price. It says most small business sellers want at least 50% down. On defaults, it says a seller note should be secured with a UCC lien on the business assets and a personal guarantee, that a seller cannot take the business back without the buyer's permission or the dispute steps in the purchase agreement, and that in many instances a default is dealt with by talking with the buyer. It also claims businesses sold with seller financing bring 20% to 30% more than all-cash sales, with no dataset behind that figure. One firm's experience, not a survey.

YourBizWorth is not a broker, appraiser, or law firm. This column is general information, not legal, tax, or lending advice.

Questions people ask

Is seller financing safe?

It is as safe as the paperwork and the down payment behind it. A real down payment, a personal guarantee, a filed security interest and reporting rights are the usual protections. Morgan & Westfield links most seller-note problems to low down payments.

How much should I ask down?

In an SBA deal the buyer must inject at least 10% of project cost, and up to half of that can be your note on standby. If you finance alone, Morgan & Westfield says many sellers want 50% or more. Start from the cash you need at closing.

What if the buyer has an SBA loan?

Your note will likely need to be on full standby: no payments to you until the SBA loan is paid off. Ask the lender how your note will be treated before you agree to terms, and have your attorney read the standby agreement.

Do I have to offer seller financing?

No. Almost half of owners in BizBuySell's Q2 2026 survey said they will not. But 90% of buyers expect it, so a cash-only listing competes for a smaller pool. If you say no, say it up front so buyers know.