What Is Seller Financing in Agency M&A?
Seller financing (also called a "seller note") is when the agency seller agrees to receive a portion of the purchase price as a loan from the buyer, paid back over time with interest. It's common in agency M&A, especially for deals under $5M where traditional bank financing is limited.
Typical Terms in Agency Deals
- Amount: 10–30% of the total purchase price
- Term: 2–5 years
- Interest rate: 5–8% (above bank rates, reflecting the risk)
- Payment: Monthly or quarterly installments
- Security: Often subordinated to bank debt; may be secured by agency assets
Why Buyers Want Seller Financing
It reduces the upfront cash needed to close. It also signals that the seller has confidence in the agency's continued performance — if the seller is willing to bet on future cash flows, the buyer sees less risk.
Why Sellers Should Consider It
Offering seller financing expands your buyer pool significantly (many buyers can't get 100% bank financing), can increase the total deal price (buyers pay more when terms are favorable), and the interest income adds to your total proceeds. However, you carry the risk that the buyer may default.
Protective Terms to Negotiate
Personal guarantees from the buyer, acceleration clauses if the buyer defaults, monthly financial reporting requirements, and covenants restricting major business changes during the note period.
Related terms: Earn-Out, Letter of Intent, Asset Purchase vs. Stock Purchase
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