Seller Financing in the Sale of a Business, is it Always Required?


Bill Grunau

Is Seller Financing Always Required to Sell a Business

A common question business owners have “Is seller financing (carrying a seller note) the only option for selling a small to mid-sized business?”  The answer is NO.  

A common practice with business brokers is to tell business owners-sellers they must carry a seller note (offer seller financing) to sell their business.  Some will go as far as to say the seller must finance the entire transaction with say 30% to 50% down payment from the buyer with the seller financing 50% or more of the transaction.  This is not always the case.

If your business is profitable, with solid financial statements & tax returns, with enough profitability to cover the debt service and provide sufficient income to a buyer then it will likely qualify for SBA financing.  

Pacific Business Sales has a track record of obtaining SBA financing for 80% to 90% of our transactions.  In fact, SBA financing is our preferred method of financing the businesses we sell.  

Why is SBA financing a great deal for both buyers and sellers? 

For sellers, SBA financing provides more cash at closing, sometimes all cash at closing if the SBA lender doesn’t require a seller note.  Even when SBA lenders require a seller note, it is typically 10% to 15% of the transaction value, which still delivers up to 90% of the transaction value in cash at closing to the seller-owner.  

For buyers, SBA financing provides 10-year financing for business acquisitions at rates ranging from Prime + 2% to Prime + 3% (maximum rate allowed by the SBA) which provides lower debt service than a seller note over 5 years and at possibly a higher rate.  The low down payment of SBA financing allows buyers to leverage their cash down payment and buy a bigger and better business while also giving them the lowest debt service costs.  

How Do I Find Out if My Business Qualifies for SBA Financing? 

At Pacific Business Sales we prepare a Market Value Analysis for owners considering selling their businesses.  In preparing the Market Value Analysis, we also look at SBA financing to determine the transaction structure, debt service, down payment, and if SBA financing will be available.  

As professional business brokers, one of our first steps in taking a business to market is to obtain a prequalification letter from one of our top SBA lenders.  This gives the seller confidence that SBA financing is available for a qualified buyer, and of equal importance, it gives prospective buyers confidence that this is a quality business with SBA financing available.  

Keep in mind that SBA lenders use your company tax returns to determine if the business qualifies for SBA financing and also to determine the value of the business.  It is critical to have good books & records, accurate tax returns, and your owner’s benefits and salary well documented to qualify for SBA financing and to maximize the value of your business.  

Pacific Business Sales works with a number of SBA PLP (Preferred Lender Program) banks.  We have long-term relationships with our lenders and thoroughly understand their underwriting requirements and industry preferences.  As business brokers, we guide both the buyer and seller through the SBA financing process and work closely with the SBA lender to keep everything on track.  


  1. Steps in Getting an SBA Loan
  2. 5 SBA Loan Myths + 7 Steps to Getting an SBA Loan 
  3. FAQs Selling Your Business
Bill Grunau

About the Author

Bill Grunau

Bill has over 20 years of experience as a Business Broker specializing in industries ranging from manufacturing to construction/contractors, technology and software, B2B services, distribution-3PL, and healthcare. His transaction experience includes successfully closed transactions as both stock sales and asset sales including transactions with licensing such as contractors, healthcare, and companies with government contracts in Orange County and other Southern California locations. Bill works closely with a team of financial advisors specializing in tax strategies to minimize taxes on the sale of a business and are available to advise clients on how to minimize the tax liability on the sale of their business. Bill is the author of “Own Your Future, Straight Talk about How to Buy a Business and Build Your Future” Bill has a BS in Electrical & Electronic Engineering studying at Cal Poly Pomona and West Coast University and also studied at Claremont Graduate school EMBA program.