The short version
- Most buyers use cash, seller financing, an SBA loan or a mix.
- Lenders often cap debt near three times cash flow.
- A seller note is usually a modest share of the price.
- Seller financing can close faster than a bank loan.
The Three Main Ways to Pay
Under about five million dollars, most deals use cash, seller financing or an SBA loan. Larger deals move to bank financing and more complex funding.
What Lenders Allow
Lenders often limit debt to about three times adjusted cash flow, which means an SBA buyer can often afford around four times or less with some cash down. Higher multiples need more buyer equity.
The loan cap is set by Congress, so do not count on a larger loan from any broker.
Seller Notes
A seller note is often ten to twenty five percent of the price and is secured by a lien. It widens the pool of buyers and can speed the closing, since a deal with seller financing can close in about six months versus nine to twelve with a bank.
It also leaves you as a lender, so check the buyer and the security.
Two Deals That Close Together
An SBA purchase is really two deals, one between buyer and seller and one between buyer and bank. Both must close together, which is why lender document requests repeat. Keep everything in one shared folder.
Working Capital
Lenders may want cash left in the company for working capital. If the buyer has to fund it, the effective price rises, so settle it in the letter of intent.
What It Means for Your Price
A higher asking multiple narrows the field to buyers with more cash. A modest multiple with seller financing opens the door to more people and often closes sooner.
Ask your broker which buyers are realistic at your number and how each would pay.
Next Steps
See how financing affects a staffing agency sale and what a broker charges, then request a valuation.