Seller Note Financing Split

A guide to buying a business with no money down using seller financing and bank loans, based on Sarah Moore's experience buying egg cartons.com.

Core Strategy for No Money Down Acquisition

• Use combination of seller's note (25%) and bank financing (75%)
• Seller's note acts as substitute for equity
• Bank views seller's note as quasi-equity for loan qualification
• Approach 20+ banks until finding one that understands the structure

Key Elements for Success

• Target businesses with:

  • Consistent profitability over many years
  • Strong track record (15+ years of operation)
  • Simple business model that's easy to understand
  • Clear financials and documentation

• Structure seller's note:

  • Make it non-negotiable part of deal
  • Keep terms extremely straightforward
  • Avoid complicated earnouts or performance metrics
  • Bank gets priority over seller note payments

Bank Financing Tips

• Focus on banks that:

  • View seller's note as equity in their ratio calculations
  • Understand small business acquisitions
  • Are willing to finance based on business track record
  • Don't require significant personal assets

• Key selling points to banks:

  • Business's long history of profitability
  • Simple, stable business model
  • Clear path to debt service
  • Seller has skin in the game via note

Common Mistakes to Avoid

• Using complex deal structures
• Getting too technical with terminology
• Overcomplicating the seller note terms
• Trying to negotiate with banks that don't understand the structure
• Giving up after first few bank rejections