Myths About Seller Financing

Myth #1: “Serious buyers always pay cash.”

Why it’s wrong: In small business acquisitions, few deals are 100% cash upfront. According to BizBuySell, over 80% of small business sales involve some form of seller financing or external financing such as SBA loans.

Even highly qualified buyers often:

• Leverage SBA 7(a) loans to conserve capital

• Offer a down payment and request a seller note to bridge the gap

• Structure deals with earn-outs or performance-based payments

Expecting an all-cash offer may cause you to reject otherwise solid buyers—and miss out on the best exit opportunities.

Myth #2: “Offering seller financing means my business looks weak.”

Why it’s wrong: Seller financing doesn’t signal weakness—it signals confidence. It tells the buyer:

“I believe in the business enough to let you pay me over time.”

In fact, offering a seller note can:

• Justify a higher sale price

• Expand your buyer pool

• Reduce the chance of a deal falling through due to lack of funding

Buyers are more likely to walk away from rigid sellers than from flexible deal structures.

Myth #3: “If I finance the sale, I’ll never get paid back.”

Why it’s wrong: Well-structured seller notes include protections such as:

• Interest rates and payment schedules

• Personal guarantees

• Collateral or reversion clauses

• Default provisions and remedies

The key is in the terms. With the right legal support, seller financing can be safe and lucrative, often generating passive income at a better rate than traditional investments.

What Small Business Owners Should Understand Instead

• Exit financing is normal—especially in deals under $5M

• Seller notes are strategic tools, not risks to avoid blindly

• Buyers often need financing, even if they’re well-qualified

• Lenders like SBA may require seller participation to approve the loan

Expect financing to be part of the negotiation, and prepare for it with proper due diligence and professional support.

Action Steps to Avoid Mistakes

✅ Talk to a qualified deal advisor or broker about typical financing structures in your industry

✅ Learn the basics of seller notes—including interest rates, amortization terms, and default protections

✅ Have your attorney review or draft the financing agreement

✅ Get a business valuation so you know the real deal value before discussing financing

✅ Prepare your books—clean financials make financing easier for the buyer

Bottom Line: Exit financing is not a red flag—it’s a standard part of modern small business sales. By understanding and leveraging seller notes, you can attract more buyers, command better terms, and increase the odds of a successful exit.