What are the most common structures for seller finance?

searcher profile

February 10, 2025

by a searcher in Lawrence, NY, USA

what are the most common structures for seller fiancé interest rate, earn out and rollover equity etc and is the term of the loan the same usually as the SBA loan?

Thanks
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commentor profile
Reply by a lender
from University of Southern California in Los Angeles, CA, USA
Hi ^redacted‌ - Most seller notes are at a lower rate than the SBA loan, we are seeing 5% to 8%. We broker a lot of SBA loans, and one common issue we see is seller notes that don’t qualify for the reduced equity injection rule change.

Structuring them correctly can help reduce your cash injection while keeping the deal bankable. To ensure the seller note counts toward your equity injection, make sure:

✅It’s on partial standby for at least two years (interest can accrue but no payment is made)

✅ It’s subordinated to the SBA loan

✅ It’s fully amortizing with no balloon payments

✅ It has a term similar to the SBA loan


I would love to help you with your SBA loan. We work with all the major SBA lenders. When lenders compete, you win! You can reach me here or directly at redacted You can also click here to schedule a meeting with me: https://cal.com/ishan-jetley-3d73m8/30min. Look forward to chatting!
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Reply by an intermediary
from University of Alabama in Birmingham, AL, USA
Seller financing is asking the seller to assure that their business can support the prospective buyer. Each seller financing option is different depending on the risk, down payment or equity injection from the buyer. Common terms typically mirror a financial institution's SBA Senior Position Terms. There are several nuances that SBA SOP will enable a buyer to structure their acquisition in be in compliance with SBA such as roll over equity and or performance requirements for the seller note. Rate is typically over Prime, which is currently 7.5%, and is measured on how much seller financing the buyer is asking for in the total transaction. Some sellers will give much lower rates if they are not taking on much seller financing, however transactions that involve larger amounts of seller financing will require the buyer to pay above market rates to satisfy the genuine risk the seller is taking on in the transaction.
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