Can a seller note cover the entire 10% down? · Business Ownership Academy

Beau Eckstein

22d • General discussion

Can a seller note cover the entire 10% down?

A lot of people ask if a seller note can cover the full 10% equity injection on an SBA acquisition loan.

The short answer?

Usually no.

Here’s how it typically works in today’s lending environment:

A common structure is what I call the “5% / 5% split.”

The seller carries 5% of the deal on full standby, and the buyer brings the other 5% in cash.

That combination helps satisfy the SBA’s typical 10% equity requirement.

But here’s the important part most people miss:

Banks want to see that YOU have some skin in the game.

Why?

Because lenders want confidence that the buyer is financially committed to the success of the business. If the structure relies entirely on debt, underwriting gets much harder, especially in today’s tighter lending environment.

Now, for a seller note to even count toward equity injection, it generally must be on full standby.

That means the seller receives no principal or interest payments for a specific period, and in some cases, for the life of the SBA loan.

This is where deal structure matters.

As SBA 7(a) acquisition lending tightens, banks are scrutinizing deals more carefully. They want prudent structures with proper alignment between buyer, seller, and lender.

That’s why creative financing is not just about reducing cash out of pocket.

It’s about building a deal structure the bank will actually approve.

The right capital stack can make or break the transaction.

If you’re working through an acquisition and want clarity on how to structure your deal properly, book a call at bookwithbeau.com.

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Can a seller note cover the entire 10% down?