There are many awesome and thoughtful comments above and I wanted to add a quick note of something I didn't see in my scan. Specifically, smaller holdbacks allow for a type of "insurance" to other mitigation factors to risk. Say the seller forgot about a risky move they made in the past in an entity deal like a large contract signed just prior to COVID that the vendor would like to enforce now that the pandemic is past, this would allow you to offset for a settlement to that vendor that the seller may not agree. I recently encountered this example and am working through it now with this idea in mind.

The benefits: 1) If you cannot get a loan, and 2) If you structure the seller financing as an earnout based on business performance.

I did a deal recently for a business that wasn't really making money and thus pretty much un-lendable from a SBA perspective. But because of the industry it was in and my product and market knowledge I thought it had a decent foundation and could turn into something down the road; the deal we ended up doing was entirely an earn-out structure based on the business achieving profitability. We could have spent less to acquire this business by paying cash or by getting a loan (if we could find someone to finance it), but this way it eliminated most risk for us, and also caused the seller to be very bought into the transition process since they have a vested interest in it's success.