A form of debt financing used in small business acquisitions in which the seller agrees to receive a portion of the purchase price as a series of installment payments.
What It Means
Seller’s notes are very common in small business purchases. Availability of attractive seller financing is a major factor in many small business acquisitions, and frequently translates into a higher selling price than an all-cash deal.
Most seller’s notes are interest bearing loans that are fully amortized over an agreed-upon period following the business purchase. In some cases, the business buyer and seller may agree on deferred or interest only payments initially in order to lessen the cash flow pressure on the buyer during the business ownership transition period.