Business for Sale Financing Options

The down payment for buying a business is normally equal to SDE. Here are options for financinig the balance due.

Business for Sale Financing Option #1

(the most common) - Bank with SBA Guarantee with or without a small Seller note

Sometimes requires the seller to take a subordinated small note - no problem except for SBA 155.
Sometimes requires additional collateral - Buyer's house and any other Buyer assets
If a Buyer gets into trouble and misses payments, the bank shuts down the business & forecloses.
They layoff lifelong employees, many are like relatives to the Seller.
They don't pay off lifelong creditors, a few are the Seller's personal friends.
The customers have no place to acquire goods & services, a few are the Seller's personal friends.
The business is closed and the Seller's legacy is gone, gone forever.
Next, the bank has an auction. Auction proceeds don't cover the bank note (not many hard assets).
Therefore, the Seller's note is worth nothing and the business is gone.

Seller financing

Seller only pays tax on the down payment and not on the note amount.
Seller gets a good return on his money and a nice monthly income.
Seller is protected because they get monthly P&L, Balance Sheet, Right to Offset, etc.
Buyer gets into trouble, however seller already knows because of the monthly reports.
Together they work out the problem, maybe seller doesn't get a payment or two but business continues.
Business continues, buyer's down payment is safe and sellers note is safe.
Employees jobs are safe, creditors are safe and clients continue to get goods and services.