Skip to content
(808) 555-0172

Seller Financing and SBA Loans: What Buyers Can Afford

Price is only half the story, because a buyer has to pay it, and Honolulu Business Brokers Firm explains the three ways it usually happens.

Each affects how fast you close.

Prefer to talk? Phone (808) 555-0172 on a weekday.

Quick take

  1. Most buyers use cash, a seller note or an SBA loan.
  2. SBA lenders limit how much debt a deal can carry.
  3. A seller note widens the pool of buyers.
  4. Check the buyer's funds before you share your books.

Three Common Ways to Pay

For deals under about five million dollars, the dominant methods are cash, seller financing and loans backed by the Small Business Administration. Many deals mix them.

SBA Loans

An SBA loan is really two deals that must close together: one between buyer and seller, and one between buyer and lender.

Lenders often limit debt to about three times adjusted cash flow, so SBA buyers may afford a price of four times or less once their own cash is added.

These loans can take nine months or more to close. Do not promise a buyer a larger loan than the program allows.

Seller Financing

With a seller note, you accept part of the price over time, often ten to twenty five percent, usually secured by a lien on the business. It widens the buyer pool and can close faster, about six months in some cases.

It also leaves some risk with you, so ask for security and good terms.

Check the Buyer First

Ask for proof of funds or a lender letter before you spend owner time. A buyer who says an SBA loan is coming but has not started one, or who suddenly pivots to a seller note, deserves a closer look.

Your Taxes Matter Too

Installment payments can spread a gain over several years. Have your CPA model how the price allocation and payment schedule affect what you keep.

How Price and Financing Fit Together

If your price needs more debt than a lender will allow, the buyer must bring more cash or you must carry a note. Knowing that early keeps you from pricing yourself out of the market.

A broker can show you what buyers can afford at several prices.

Next Steps

Read broker fees and the bulk sale report. Then ask what your business is worth.

Tap to call (808) 555-0172