PROBLEM: Great deals die when sellers flinch at financing part of their own price.

You make a fair offer. You even stretch to meet the seller’s number.

But the catch? That last chunk—the bridge between your budget and their ego—isn’t cash. It’s a seller note.

And the moment you bring it up, everything changes.

The room goes cold. Eyes narrow. The seller starts backing away.

What just happened?

You triggered their deepest fears.

To you, a seller note is smart structure. Strategic leverage. SBA-friendly.

To them, it’s a test of trust they’re not sure you’ve passed.

It feels like risk. It feels like being left behind. It feels like gambling on a stranger with their life’s work.

And here’s the kicker: They may not even know why they’re uncomfortable. Behavioral science calls this the affect heuristic—when gut feelings drive decisions faster than logic can catch up.

This isn’t a spreadsheet problem. It’s a psychology problem.

WHY LOGIC ALONE FAILS

Buyers try to pitch seller notes like this:

• “You’ll make more with interest.”
• “You’ll get capital gains tax treatment.”
• “It shows the bank we’re both confident.”

All true. All irrelevant.

Because:

• Loss aversion (Kahneman/Tversky) makes sellers twice as sensitive to what they’re giving up as to what they might gain.
• Mental accounting (Thaler) means sellers often silo a note as “maybe money” vs. cash at close as “real money.”
• The endowment effect inflates their perceived value of the business in their hands vs. in yours.
• Risk ambiguity makes a note feel riskier than it is—even when backed by a strong buyer and a stable business.
• The hard work they put into building their business makes them feel slightly offended that someone who "can't quite afford to buy it" wants them to help finance the purchase.

You’re not negotiating a number. You’re negotiating control, ego, and belief.

THE WINNING FRAME: Notes as Trust-Builders, Not Risk-Shifters

Elite buyers don’t sell notes as financial instruments. They position them as psychological bridges.

“This isn’t a discount. It’s a shared bet on the future.”

The moment you ask for a seller to finance part of their own price—especially if it’s forgivable or on full standby—you’re really asking them: Do you believe in me? Do you believe in the business? Do you believe this structure protects your legacy and gets you paid?

So here’s how to get that yes:

1. Anchor in Belief and Alignment

“This structure says: I believe in what you’ve built. I’m not trying to renegotiate your price. I’m just aligning the payout with real-world performance—something you’ve always believed in too.”

• Emphasize mutual risk: you’re both betting on the business.
• Position the note as a price preservation tool—not a concession.

Language to use:

• “This gets you the full value you asked for—just staged to match what the business actually does post-close.”
• “We’re both trusting the same numbers here. This note is how we put that trust on paper.”

2. Make It About Stewardship, Not Control

“You’re handing this business to someone new. A standby note lets you hold a stake in its future—without the day-to-day burden.”

Sellers often bristle at giving up control, especially if they don’t feel ready to exit emotionally. A standby note keeps them psychologically tethered—they’re still ‘in the game,’ even if passively.

Frame it as:

• A form of legacy equity—symbolic of their continued influence.
• A quiet form of oversight—“You’re not in the driver’s seat, but you’ve still got a seatbelt on.”

3. Recast ‘Standby’ as a Safety Valve

“This is a backstop, not a write-off. The note stays on the books. If we perform well and meet our obligations, you’ll get every dollar.”

• Clarify that SBA standby rules don’t erase the obligation—they defer it.
• Offer reporting updates (quarterly P&Ls, revenue summaries) to keep the seller informed and confident.
• If you feel comfortable with it, even lead with offering a personal guaranty on the note.

4. Contrast It With the Real Alternative: a Lower Price

“You could ask for $2M all cash at close… or $2.5M with some patience. This note is what makes the $2.5M real—not imaginary.”

Frame the note as the difference between the seller’s dream price and market reality.

• “Cash at close” would force a price cut.
• A forgivable or standby note preserves their number while sharing the uncertainty.

This is loss aversion in reverse—they’d rather keep the sticker price and bet than take a haircut now.

THE 5-STEP PSYCHOLOGICAL PLAYBOOK

Use these tactics to turn seller hesitation into alignment—even on larger, performance-based, or SBA standby notes.

1. Build Trust Before the Ask

Seller financing is a trust signal. And most buyers ask for it before earning that trust.

Example: One buyer shared a detailed 30-60-90 plan before discussing terms. The seller said yes to a $450K note—double what they’d originally refused—because they felt the buyer would protect what they’d built.

Ways to build trust early:

• Present a thoughtful transition plan.
• Offer seller involvement (as advisor, not employee - subject to SBA rules).
• Provide references or prior business experience.
• Show your working capital plan and liquidity position.
• Offer full transparency on your SBA loan application

2. Anchor It as a Win-Win

Don’t lead with “the bank requires it.” Lead with alignment and shared upside.

“This structure protects your price, rewards future performance, and shows we’re both serious.”

Example: A seller balked at a $200K note until the buyer reframed it as a “performance bonus”—easily repaid if revenue stayed flat or grew. Suddenly, it felt earned, not owed.

Tactics:

• Call it an “alignment bonus,” not a loan.
• Tie repayment to seller-provided projections ("if the business performs like you say it will, there will be zero problems paying the note.")
• Highlight tax deferral or interest income.

3. Use Forgivable Notes Strategically

Forgivable or standby notes shine when:

• The seller’s price exceeds what the business supports.
• The buyer can’t justify 100% of the valuation in present cash flows.
• There’s deal risk, customer concentration, or seasonality.

“This forgivable note gives you your full price—but only if the business performs as projected. If not, I’m protected.”

Example: I often help clients structure forgivable notes based on the revenue 12 months after closing meeting or exceeding the most recent full year revenue. If it doesn't meet, then some or all of the note is forgiven. We will size the note based on the risk of the deal. Or, if there are other risks like excessive customer concentration, we can even structure forgiveness to be triggered if that customer is lost or significant reduces their business.

Use cases:

• Backfill the final 10–15% of valuation.
• Replace equity you don’t have.
• Reward seller optimism—but only if proven.
• Protect against customer concentration or other key risks

4. Appeal to Legacy and Fairness

Money matters. But legacy matters more.

“This lets you ensure the culture and customer care you built continues—because my incentives are tied to it.”

Example: A seller accepted a note on standby for 2 years because the buyer agreed to keep her daughter employed and preserve the mission-driven brand.

Tactics:

• Retain long-tenured staff.
• Keep the brand name.
• Honor seller relationships.

It wasn’t about the money. It was about the meaning.

5. Tailor to Their Biases

Not every seller is the same. Match your pitch to their psychology.

• Optimistic seller? Emphasize upside.
• Risk-averse seller? Stress protections and deferral.
• Control-oriented seller? Emphasize alignment, not distance.

Example: One buyer structured a three-layered seller note:

• $200K guaranteed over 5 years
• $100K "bonus" note that only pays if DSCR is maintained at a certain level
• $100K standby for 2 years —only repaid if no major customer churn

Each piece hit a different psychological button. The seller viewed it not as “risk,” but as “earned outcome.”

THE BOTTOM LINE

Seller notes—especially forgivable or full standby—aren’t about interest rates.

They’re about belief, trust, and psychological alignment.

When you position them as legacy tools, price protectors, and shared bets—not as concessions—you shift the conversation entirely.

The result? More deals closed, on better terms, with smarter structure.

That’s how the 1% of buyers win.

Stay sharp.

- Eric

Buyers Black Book