Seller financing is an arrangement in which the seller lets the buyer pay part of a business purchase price over time.
Definition
Seller financing occurs when a business seller accepts payment over time for part of the purchase price, usually under a note or other agreed payment instrument. In a civil engineering firm sale, the terms may address principal, interest, payment dates, maturity, security, default, and whether payment depends on other deal conditions. It can help bridge a gap between the buyer's available funds and the agreed price, while leaving the seller exposed to the buyer's ability to repay. A seller-financed amount is distinct from cash paid at closing and from an earn-out, which is contingent on specified future results or events. Firms and deal parties may negotiate different repayment structures and protections; the purchase documents define the actual obligation. Owners comparing ownership paths can review the succession options guide.
How owners use it
- Separate the amount paid at closing from the amount the seller agrees to finance.
- Review proposed repayment timing, interest, security, and default provisions as part of transaction terms.
- Example: A buyer pays $800,000 at closing on a $1,000,000 price, so $1,000,000 - $800,000 = $200,000 is seller-financed.
- Compare a seller note with buyer equity, outside borrowing, or contingent earn-out consideration.
