Glossary
Seller note
A seller note is part of the purchase price that the seller lends to the buyer, to be repaid over time with interest. It reduces the cash and bank financing needed at closing and keeps the seller invested in the business's success.
In an SBA 7(a) deal, a seller note can count toward the buyer's equity injection only if it is on full standby (no payments) for the entire loan term, and only for up to half of the required injection. See Seller notes and full standby.
The trap: agreeing a seller note in the letter of intent without confirming how the lender will treat it.