Seller financing

Seller financing — the seller receives a down payment (10–30% is common) and a promissory note for the balance, paid from the business’s future cash flow over 2–5 years. It replaces the acquisition bank debt PH banks mostly won’t write, keeps the seller invested in a clean transition, and — most usefully — prices honesty: a seller who won’t carry a note payable from his own claimed cash flow has told you what he thinks of his own P&L. Unpaid installments also function as a built-in holdback against discovered liabilities.

First used in: 4.2 · Buying cash flow: acquisition I