What are some standard examples of Seller financing?

searcher profile

June 08, 2022

by a searcher from DePaul University in Oklahoma City, OK, USA

Can anyone share some of the standard seller financing options they have achieved or have seen for various deals? For example, how many years are sellers typically willing to finance? Do they expect interest paid on the financing? If so, what are typical interest rates charges in seller financing deals?

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commentor profile
Reply by a searcher
from Loyola University of Chicago in Chicago, IL, USA
So many ways to structure SF, but essentially the seller takes back the note over some agreed period of time, and you make the payments to the seller. Can be 100% Seller Finance or some other percentage (60% SF, 40% other financing). May or may not include interest in the deal. Timeline can be negotiated anywhere from###-###-#### + years (depending on how motivated seller is, reason they're selling, goals, etc.). Also, SF deal can be done faster than commercial financing since there's no credit committee or back & forth with the banks (which can take weeks or even months...)
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Reply by a lender
from University of Wisconsin in Madison, WI, USA
What is typically normal in the SBA space is to have a portion of seller financing that is on full standby (no payments for the duration of the SBA loan) since this allows you to use that piece of seller financing for part of your equity injection for the purchase.

There is also normally a seller note with P&I payments, normally amortizing. Terms negotiable between the buyer and seller, so long as the deal still cash flows at the needed debt service coverage based on the combined loan payments for Senior bank (SBA loan debt) and the seller note payments.
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