Will a seller expect a down payment if they finance the sale?

When a seller agrees to be paid over time, the seller is lending to you, and lenders often look for the borrower to have something at stake. Expect the question of your own cash to come up early.

Why the seller wants your cash

There are two reasons. First, commitment: a buyer who has put in real money is less likely to walk away when the business hits a rough patch. Second, protection: if payments stop, the seller has already received something. A seller who finances with nothing down carries nearly all the risk, so some will ask you to contribute.

How the pieces fit together

The price is usually paid from several sources. Your down payment is one. A bank or other lender may provide another, and the seller’s note covers the rest. A bank lender will often look hard at the seller’s note and may set conditions on its repayment. The page on heavy vendor support shows how that view plays out.

Negotiating it without a number

Talk about what the seller needs rather than a figure. Ask what would make them comfortable, such as security over the assets, a personal guarantee, or a staged payment plan. Offer your own contribution in terms of what you can fund without straining the business. If cash is tight, ask whether part of it can follow later, or whether the seller will stay involved to protect their own note.

• Tell the seller early what you can contribute.
• Ask how the seller wants the note secured.
• Check what your bank will allow before you agree terms.
• Have your lawyer write down every payment term.