If you're thinking of buying a business and need a loan, understanding the seller note is crucial.
Hard money lending

If you’re thinking of buying a business and need a loan, understanding the “seller note” is crucial. Let’s break it down.

When you want an SBA Loan to buy a business, the seller’s trust in you matters a lot. This is where the seller note comes in. It’s like the seller saying, “I believe in this business, and I want you to succeed.”

A seller note is when the seller of the business loans you part of the money you need to buy it. This is different from the SBA loan and usually about 10% to 20% of the total cost.

Having a seller note is a big advantage, it shows that the seller cares about your success. The terms can be decided between you and the seller but it’s best if these terms match the SBA loan’s terms. 

Here’s an ideal setup: you get 80% of the money from the SBA loan, you invest 10% yourself, and the seller gives you a 10% note. This way, you use the loan, show your commitment, and keep the seller invested in the business’s success.

A smart trick is to negotiate a “standby” seller note. This means you might only need to invest 5% of your money, and the seller keeps a 5% note. But you can’t pay back this note while the SBA loan is active. This works best if you’re an integral part of the business.

In short, the seller note is like a promise from the seller that they believe in you and the business. At LoanBud, we’re here to guide you through all of this. If you’re ready to buy a business and need a loan, contact us today. Our experts will help you step by step to make your business dreams a reality.


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