What is seller financing in an SBA deal?

Seller financing is a note the seller takes instead of cash at closing. On an SBA change of ownership, whether that note counts as equity, and for how much, sits in Appendix 15 of SOP 50 10 8.1 for loans the SBA's notice puts under that SOP. This site does not restate the fraction. The lender has to.

In a purchase, the sources of funds are some mix of buyer equity, senior debt, and sometimes a note the seller holds. The seller note is not a gift. It is debt or a deferred piece of the price, with its own rate, term, and subordination. Lenders care because the cash leaving the company to pay the seller competes with the cash that pays them. Buyers care because a large note can make a price look financeable when the cash equity is thin.

The SBA's 7(a) page says a 7(a) loan can be used for a complete or partial change of ownership, and that the maximum 7(a) loan is $5 million. It does not, on that page, publish the equity-injection math for a seller note. The 2026 information notice points change-of-ownership updates to Appendix 15. Read that appendix with the lender. Do not treat a rule of thumb from a conference panel as the SOP.

Ask which SOP applies to the loan number or the application date. Ask whether the seller note is debt in the coverage test even if some of it counts as equity. Ask what standby period the appendix requires, if it requires one. Ask who must order any quality-of-earnings report. Those are the decision questions. Siddwell's acquisition-rules page keeps the same boundary: the notice and the public loan pages are in scope, and the unpublished threshold is not invented here.

Even without a fraction, a seller note has terms a buyer and a seller can describe. How much of the price is the note, what rate and term are proposed, whether it stands still while the senior lender is paid, and what happens if the company misses a payment. Those are commercial terms. Whether any of the note counts as the equity injection, and whether it is still debt in a coverage test, are SOP questions for the lender on a change of ownership the 2026 notice puts under Appendix 15. Ask both. A note that makes the price look financeable and a note the lender will treat as equity are not automatically the same note. Siddwell will not supply the fraction the appendix was not quoted for.

Siddwell is an AI-native investment bank for privately held US companies with $1M to $100M in revenue, doing sell-side M&A and capital advisory.

Siddwell will not quote an equity percentage the firm has not taken from the SOP in front of it. On a financing mandate, the lender who will hold the note's treatment has to say so in the process, next to the other lenders.