A seller financing agreement template is used when the seller of a small business, or of a partner's share in one, lends the buyer part of the price and is paid over time. The buyer pays a down payment at closing and signs a promissory note for the rest; the seller takes security over the business or the shares until the note is paid. It is common because banks lend reluctantly against small businesses, and it is risky for the seller in a way the template has to manage: the seller has handed over the business and is now its creditor. This page walks the document from the seller's side, the price and the down payment, the note's figures, the security and what happens on default, with the free partnership worksheet on this site for the share being sold.
The price, the down payment and the note
The agreement states the price, the down payment paid at closing and the balance the seller finances. The balance is a promissory note with an interest rate, a term in months and a payment schedule, monthly, with a balloon at the end or fully amortising. On the worked example on this site, a 30% share at a $400,000 valuation is $120,000, and a seller financing the balance after a down payment states the note's rate and term in the agreement, not in a side letter. The figures are the seller's to set; this site publishes no rate.
Security, covenants and default
The seller takes security: a lien on the business's assets, a pledge of the shares, or both, filed where the state requires so it holds against other creditors. Covenants keep the business in a state that can repay: no further borrowing above a figure, no sale of assets outside the ordinary course, financial statements to the seller quarterly. Default is late payment beyond a grace period, breach of a covenant, or insolvency, and the remedy is acceleration of the note and enforcement of the security. A template that lends without security is a gift with a schedule.
Closing, and the record afterwards
At closing the buyer pays the down payment, signs the note and the security agreement, and takes the business or the shares; the seller files the lien. For years afterwards the agreement is a record with a balance that falls and a payment due each month, and the seller's job is to watch it. Termslane Pro keeps the seller financing agreement against the buyer with the note's figures, the schedule and the versions, and exports it. The CFPB's guidance cited below is the reference where the financed property includes a home.
Questions people ask about seller financing agreement template
What is seller financing?
The seller of a business or a share lends the buyer part of the price: a down payment at closing, a promissory note for the balance with a rate and a schedule, and security over the business or the shares until the note is paid.
What security does a seller take?
A lien on the business's assets, a pledge of the shares, or both, filed where the state requires so it holds against other creditors, with covenants that keep the business able to repay.
What happens if the buyer defaults on seller financing?
The note is accelerated and the seller enforces the security: the assets or the shares. The agreement states the grace period, what counts as default and the remedies, so the seller is not reading them for the first time when payment stops.