A worked example
| Item | Amount |
|---|---|
| Price | $1,000,000 |
| SBA loan + buyer equity at closing | $800,000 |
| Seller note | $200,000 at 8%, 10-year amortization, 5-year balloon |
| Your monthly payment (if not on standby) | about $2,427 |
| Balloon at year 5 | about $120,000 |
- Sourced value range for your trade and state
- The buyer types most likely to call you
- 3 fixes that move your multiple + a PE-offer checklist
After purchase we email you a short questionnaire, then your brief as a PDF. 14-day money-back guarantee. TradeExit Guide is not a business broker or appraiser. Refund policy
Protect yourself
- Security: a lien on business assets (usually subordinate to the senior lender) plus a personal guarantee.
- Default triggers: missed payments, default on the senior loan, sale of the business.
- Reporting: financial statements during the note term.
- Standby: with SBA-financed buyers, a note counted toward the buyer’s equity injection must be on full standby (no payments), under SOP 50 10 8. Know this before you count on the cash flow.
Tax treatment
The installment method can defer capital gain until you receive principal, but depreciation recapture is taxed in the year of sale (IRS Publication 537). Interest is ordinary income. Model the net with the after-tax proceeds calculator.
- Sourced value range for your trade and state
- The buyer types most likely to call you
- 3 fixes that move your multiple + a PE-offer checklist
After purchase we email you a short questionnaire, then your brief as a PDF. 14-day money-back guarantee. TradeExit Guide is not a business broker or appraiser. Refund policy
Frequently asked questions
What is a seller note?
A promissory note from the buyer to the seller for part of the purchase price, repaid with interest over an agreed term.
Is a seller note risky?
Yes: it is usually subordinate to the buyer’s bank or SBA loan, so if the business struggles you are paid last. Security, guarantees and a shorter term reduce the risk.
Sources
- SBA SOP 50 10 8 key changes (Whiteford client alert) (accessed 2026-09-23)
- IRS Publication 537 - Installment sales (accessed 2026-09-23)