Seller Financing When Selling a Business in Texas: Pros, Risks and Typical Terms

By Josh Campbell, Business Broker · First Choice Business Brokers Dallas Metro · Updated October 2026

Quick answer: Seller financing means you, the owner, carry a note for part of the sale price, and the buyer pays you back over time with interest. In DFW small business sales, seller notes typically cover 5% to 20% of the price, run 3 to 7 years, and carry interest close to market rates. Offering one can attract more buyers, support a higher price and help SBA deals close. It also means some of your money stays at risk after you've sold.

Why buyers and lenders like seller financing

It shows you believe the business will keep performing.
It closes the gap when the bank won't finance the full price.
It lowers the amount of cash the buyer needs up front.
In SBA deals, a note on full standby for the life of the SBA loan can count toward up to half of the buyer's required equity.

Benefits for the seller

More buyers: more people can afford the deal.
A higher price: buyers will often pay more when terms are flexible.
Interest income: you earn a return on the amount you finance.
Possible tax benefits: an installment sale can spread capital gains tax over several years. Confirm this with your CPA.

Risks for the seller

The buyer could default or run the business badly.
In SBA deals, your note sits behind the bank's loan and may have payment restrictions.
You may have little control once the business changes hands.

How to protect yourself

Choose a buyer with relevant experience and real cash in the deal.
Have the buyer sign a personal guarantee, and their spouse too if appropriate.
Take a security interest in the business assets (a UCC filing).
Include covenants: financial reporting, minimum working capital, and limits on taking money out of the business.
Set default and cure terms, with the right to step back in if needed.
Have a Texas business attorney draft the note and security agreement.

Typical terms

Term	Common range
Share of price	5–20%
Length	3–7 years
Interest	Near prime to a few points above
Payments	Monthly, sometimes interest-only at first
SBA standby	Full standby (no payments) for the life of the SBA loan if counted toward the buyer's equity

Example

A business sells for $800,000. The SBA lender funds $680,000, the buyer puts in $80,000, and the seller carries a $40,000 note over 5 years at 8%. The seller receives about $760,000 at closing plus about $811 a month once payments begin.

Josh's take: Owners hear "seller note" and picture themselves chasing payments from the guy who just ran their company into the ditch. Fair worry. But a modest note tells the buyer, and their bank, that you believe in what you built, and it often buys you a better headline price. The trick is structure: a personal guarantee, a UCC filing and real covenants. Be a lender, not a donor.

Frequently asked questions

Do I have to offer seller financing?

No, but refusing it can shrink your buyer pool and lower your price. Many SBA deals include at least a small note.

What happens if the buyer stops paying?

Your note, guarantees and security agreement set out what you can do. Strong documents are your protection.

Can seller financing replace a bank loan entirely?

Sometimes, in smaller deals. But you then carry all the risk, so vetting the buyer is critical.

Is seller financing taxed differently?

It may qualify for installment sale treatment. Check with your CPA.