Yes, you can have seller note offset language in your purchase agreement. It is typically a paragraph in the agreement that says that you can offset the amount owed under the seller note for any breaches of representations, warranties or covenants of the seller. Sometimes there is language that says you can only offset after the loss has been agreed to or determined by a court of competent jurisdiction. The only issue I've seen with seller note offset language is when you're using the seller note as part of the buyer equity injection because it is on full standby. I've had banks argue that there can be no offset to that note during the life of the bank loan because it is being credited toward equity and must remain outstanding. That never made any business sense to me, but nevertheless we had to create to seller notes in that transaction with one on full standby (and credited toward equity for SBA purposes) and one subject to an offset.

You can also have performance based seller notes with SBA loans. Here is a link to Live Oak's explanation. redacted