Business acquisitions
Seller financing can make a purchase possible. The part buyers underestimate is the first six months after closing, when the note, payroll and inventory all need cash at once.
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Updated October 13, 2026 · Merchant Fund Express
Owner financing, or a seller note, means the seller lets you pay part of the purchase price over time instead of all at closing. It reduces the cash you need up front and keeps the seller invested in a smooth handover. It also adds a fixed payment that the business has to carry from day one.
Most purchases combine three sources: the buyer's own cash, a seller note, and outside funding. The mistake is using every dollar to close and leaving nothing to run the business.
Terms are whatever buyer and seller negotiate, so read the note with an attorney. The points that matter most for later funding are the payment amount, whether the seller holds a lien, and whether the note restricts additional financing.
A buyer purchases a landscaping company for $600,000. The business deposits about $85,000 a month and has run for 11 years.
| Source | Amount |
|---|---|
| Buyer cash at closing | $120,000 |
| Seller note | $180,000, about $5,400 a month |
| Outside acquisition financing | $300,000 |
| Total purchase | $600,000 |
| Cash left in the business after closing | $15,000 |
Spring payroll for the crew runs about $38,000 every two weeks, and the trucks need $12,000 of maintenance before the season. With $15,000 of cash, the business is short in its first month even though it is profitable over the year.
The fix is planned before closing: a working capital facility sized to one season's cycle, say $75,000, so payroll and maintenance do not depend on the first invoices clearing. The seller note payment of $5,400 is then counted with every other obligation when that facility is sized.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
The ownership change resets some of what funders read. We look at the business's history and deposits, and the new owner's credit and ownership share; Tier 1 asks for at least 50% ownership. Owners who need cash after the purchase usually look at a line of credit for the seasonal cycle, working capital for a one-time gap, or equipment financing for replacements.
For the purchase itself, see funding for a business acquisition. Disclose the seller note as an obligation; a funder will count its payment.
If the seller note forbids additional debt without consent, get that consent in writing first. If the business changed bank accounts at closing, a few months of statements in the new account make the file easier to read. And if the seller note payment already takes a large share of free cash flow, renegotiating the note schedule may help more than adding another payment.
Check where the file stands with the qualification check before closing, not after.
Yes. Its payment is an obligation the business must carry, and a funder sizing new financing will include it.
Often, because the business history carries over. A change of bank account or ownership can mean more documents. Disclose the purchase on the application.
Sometimes. Read the note for restrictions on additional debt or liens, and get written consent if it is required.
See funding for a business acquisition for what a purchase file needs, or apply and describe the deal.
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