So here’s a thing nobody tells you about selling a business: the finish line keeps moving.
I found that out the hard way about three years back. My company was profitable, my team was solid, and I figured the exit would take, what, four months? Six tops? Try eleven months, two renegotiated letters of intent, and one buyer who ghosted me so hard I started checking my spam folder. Fun times 🙃
But that whole mess taught me something valuable. The deal that finally closed didn’t close the way I planned. It closed because I offered owner financing at a competitive interest rate. And honestly? That structure ended up making me more money after the exit than I ever expected.
Let me break down what actually happened, because if you’re staring down your own exit right now, this might save you a headache or three.
Why Buyers Freeze When You Say “Cash Up Front”
Picture this. You’ve built something real. A buyer walks in, loves the numbers, loves the team, and then you mention your asking price. Their face does that thing. You know the one.
Here’s the reality I ran into:
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Most buyers don’t have the full purchase price sitting in cash
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Traditional lenders move at the speed of molasses in January
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SBA loans take months and come with a mountain of paperwork
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Every round of bank scrutiny gives the buyer another excuse to walk
After my third buyer bailed at the financing stage, I sat down with my accountant and said something eloquent like, “What on earth do I do now?”
Her answer: sell the thing yourself. Finance it yourself. Get paid like a bank while you’re at it.
How Owner Financing Actually Works (The No Jargon Version)
The concept is simple. You become the lender. The buyer pays you a down payment, then makes regular payments with interest until the note is paid off.
Say your business sells for $800,000. Buyer puts down $160,000, you carry a note for $640,000 at 8 percent interest over seven years. That note throws off roughly $9,900 a month. Do the math over the full term and the interest alone puts a serious chunk of change in your pocket.
Want to structure it smart? Keep this checklist handy:
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Get a professional valuation so you’re not pricing from vibes
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Require a meaningful down payment (20 percent or more keeps the buyer motivated)
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Set an interest rate that beats what your money would earn sitting in a savings account
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Use a well drafted purchase agreement reviewed by a lawyer who does this often
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Hold a lien on the business assets until the note is paid in full
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Build in a balloon payment option so you’re not waiting a decade
The “Wait, I Get Paid Interest Too?” Moment
This is the part that genuinely surprised me. Everyone talks about the sale price. Nobody talks about the note’s yield.
Banks make their money on interest. When you carry the note, you make yours the same way. That 8 percent interest wasn’t a concession. It was income. I set my rate competitively, meaning high enough to earn real returns but low enough that the buyer still felt like they got a fair deal. Everybody wins, which is the weird and wonderful thing about good deal structures.
Meanwhile, I kept a modest equity stake and a consulting arrangement for the first year. So I got three paychecks: note interest, the consulting fee, and my leftover equity. Not bad for a guy who almost sold for peanuts out of sheer exhaustion.
A Few Things I Wish I’d Known Sooner
Quick honesty break. I made mistakes. Here are a few I’d hand to past me on a sticky note:
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Get insurance on the note. If the buyer stops paying, you want protection. It’s cheap compared to the headache.
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Verify the buyer’s financials like your life depends on it. Because your retirement kind of does.
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Interview the buyer’s track record. Past defaults show up when you look.
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Don’t skip the escrow company. They handle the boring stuff so you can sleep at night.
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Count the balloon payment before you agree to it. Make sure the timeline makes sense.
Final Thoughts (and a Slight Nudge)
Owner financing at competitive interest isn’t some exotic maneuver. It’s how a lot of small business deals actually get done. You get an income stream after you leave. The buyer gets a shot at ownership they couldn’t get elsewhere. The business keeps running.
If you’re planning an exit and the only plan on your whiteboard is “find a buyer with a big checkbook,” maybe flip the whiteboard over. There’s a whole other plan hiding on the back. Mine’s a little smudged with coffee stains and regret about buyer number two. But it worked.
Go talk to an accountant and a lawyer. Today, not eventually. Your future income stream will thank you.