Write out the funds flow
Identify the purchase price, debt payoff, fees, tax reserves and any working capital or inventory adjustment. Then show the amount delivered at closing.
Keep escrow and seller financing on separate lines. Escrow addresses a defined holdback; a note is credit you extend to the buyer under negotiated terms.
Examine a seller note as a lending decision
Ask how the buyer will repay the note and what happens if business performance declines. Payment dates, interest, security and default terms deserve professional review.
A higher total price can come with greater collection risk. Consider whether the note suits your plans if payments arrive late or the buyer cannot pay.
Understand the buyer's financing conditions
A lender may review the business records, buyer qualifications, lease and required operating cash. The purchase agreement and the loan need to reach compatible outcomes.
Do not treat a buyer's statement that financing is available as a commitment from a lender. Ask for evidence appropriate to the stage of the transaction.
Compare what remains after obligations
Have your CPA model tax and allocation questions before you sign. Your attorney should review security, guarantees and the remedies available under the proposed terms.
Decide what balance of immediate cash and continuing exposure you can accept. The strongest offer for your goals may not be the one with the largest headline.
Turn the question into a sale preparation step
To compare cash at closing and seller financing, you can also prepare the earnings record and plan confidential buyer disclosure.
Bring this financing question to your advisers alongside the New Jersey paperwork checklist, or request a private valuation introduction to discuss the proposed sale.