Seller Note
A seller note is financing provided by the seller, in which part of the purchase price is paid over time under a promissory note rather than in cash at closing. It bridges valuation and liquidity gaps and signals the seller's confidence.
Why Seller Note Matters in a Laundromat Sale
Seller notes appear in most structures that a bank alone will not fully fund, and their terms interact with SBA rules. Under the current SOP, a seller note counting toward the buyer's required equity injection must be on full standby — no principal and no interest — for the life of the 7(a) loan, and it may cover no more than half of the required injection (Source: SBA SOP 50 10 8). A seller agreeing to 'carry a note' without knowing which kind is agreeing to something they have not priced.
Example
On a $400,000 purchase with a $40,000 required injection, the buyer contributes $20,000 cash and the seller carries $20,000 on full standby for ten years. A separate $50,000 amortizing seller note behind the bank debt is a different instrument with different risk and different tax timing.
What to Check
- Establish whether the note counts toward the buyer's SBA injection, because that changes everything about it.
- Document security, subordination, default remedies, and what happens if the buyer sells.
- Model the after-tax timing with your CPA before agreeing to terms.
Where This Comes Up
- Seller Financing for Laundromats: Structures Both Sides Can Live With
- Seller Financing When Selling a Laundromat: Terms, Risk, and Security
- Standby Agreement
- Laundromat Valuation: How Stores Are Priced and Why
Related Terms
- Standby Agreement — A standby agreement is a written undertaking by a creditor — usually a seller holding a note — to take no payments and enforce no remedies against the borrow...
- Equity Injection — Equity injection is the buyer's own money contributed to a financed acquisition
- SBA 7(a) — SBA 7(a) is the U.S. Small Business Administration's primary loan guaranty program
- DSCR (Debt Service Coverage Ratio) — DSCR, or debt service coverage ratio
See the full laundromat glossary for all 78 terms.
The Next Step
Sources
- U.S. Small Business Administration, 7(a) Loans and SOP 50 10 8 — https://www.sba.gov/loans/7a-loans/
This page is general information about laundromat transactions, not legal, tax, or investment advice, and not a guarantee of sale price, timing, or financing approval. Verify current rules with your own CPA, attorney, lender, and the relevant state or municipal agency before acting.