The seller note worksheet
The terms a seller note has to settle and the payment arithmetic with a worked example, plus the checks to add when the buyer borrows under an SBA loan.
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A buyer or a seller can fill in this worksheet. As it is filled in, the blank lines show which terms are still open. The payment section works out the monthly figure for a sample note and leaves blank rows for a real one.
The terms to settle
A blank line marks a term nobody has decided yet.
- Amount of the note: ____________
- Interest rate, and whether it is fixed or changes: ____________
- Whether interest is simple or builds on itself, and how often: ____________
- Length of the note in months: ____________
- Amortization period, if it differs from the length (a difference means a balloon): ____________
- Balloon amount and due date, if any: ____________
- Date of the first payment, and any interest-only period before it: ____________
- Payment day of the month and where payments go: ____________
- Security: which assets the seller holds a lien on, and who files the financing statement: ____________
- Personal guaranty from the buyer, and whether it is full or limited: ____________
- Rank behind the buyer's bank, and the name of the agreement that sets it: ____________
- What counts as a default, and how many days the buyer has to cure it: ____________
- What the seller may do after an uncured default: ____________
- Late charge, if any: ____________
- Whether the balance comes due if the buyer sells the business: ____________
- Financial statements the buyer sends the seller, and how often: ____________
- Whether the buyer may pay early, and on what terms: ____________
- Whether the note can be offset against claims under the purchase agreement: ____________
The payment arithmetic
Sample figures, made up: a $150,000 note at 6.5 percent a year, fixed, paid down to zero over 84 months.
For a note that pays down to zero in equal monthly payments:
- Divide the yearly interest rate by 12. Call it r. At 6.5 percent, r is 0.065 divided by 12, or 0.0054167.
- Count the monthly payments. Call it n. Seven years is 84.
- Work out (1 + r) raised to the power n. At the numbers above that is 1.5742393.
- Multiply the amount of the note by r and by that figure, then divide by that figure minus 1. The result is the monthly payment.
| Input | Value |
|---|---|
| Amount of the note | $150,000 |
| Interest rate | 6.5% a year, fixed |
| Length | 84 months, paid down to zero |
| Monthly payment | $2,227.42 |
| Total paid over the life of the note | $187,102.90 |
| Total interest | $37,102.90 |
In each of the first three months, interest is the starting balance times r, and the rest of the payment reduces the balance.
| Month | Starting balance | Interest | Principal | Ending balance |
|---|---|---|---|---|
| 1 | $150,000.00 | $812.50 | $1,414.92 | $148,585.08 |
| 2 | $148,585.08 | $804.84 | $1,422.58 | $147,162.50 |
| 3 | $147,162.50 | $797.13 | $1,430.29 | $145,732.21 |
The same $150,000 at 6.5 percent, shaped three ways:
| Shape | Monthly payment | What is left at the end | Total interest |
|---|---|---|---|
| Paid down over 7 years | $2,227.42 for 84 months | Nothing | $37,102.90 |
| Paid as if over 10 years, balloon at year 5 | $1,703.22 for 60 months | A balloon of $87,049.31 | $39,242.49 |
| Interest only for a year, then paid down over 6 years | $812.50 for 12 months, then $2,521.49 for 72 months | Nothing | $41,297.24 |
The balloon shape lowers the monthly payment by $524.20 and leaves $87,049.31, more than half the note, due in one payment at month 60.
Blank rows for a real note:
| Month | Starting balance | Interest | Principal | Ending balance |
|---|---|---|---|---|
| 1 | ||||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 |
Checks when the buyer borrows under an SBA loan
- Is the note meant to count toward the buyer's required 10 percent equity (SBA Standard Operating Procedure 50 10 8.1, Appendix 15)? If so it is on full standby for the entire term of the SBA loan, and it can supply at most half of that equity.
- Has the seller read the standby agreement (SBA Form 155 or the lender's own version) with the note attached?
- Does the note say whether interest accrues during standby, whether it builds on itself, and how the balance is repaid after the SBA loan is paid off?
- If the note is paid normally, has the lender included its payments in the debt service coverage test?
- Does anything in the deal work like an earnout? SBA rules prohibit seller earnouts in a change of ownership.
- Will the seller stay on after closing? In an initial acquisition the seller may work only as a consultant: for up to 24 months in total under procedure 50 10 8.1, and up to 12 months under procedure 50 10 8.
- Which version of the SBA procedure applies? Applications that receive an SBA loan number on or after October 1, 2026 follow procedure 50 10 8.1, and applications submitted through September 30, 2026 follow 50 10 8 (SBA Information Notice 5000-880695).
Who reads the note before anyone signs
The note itself is a separate loan document, drafted by a lawyer. Four readers check it before signing:
- The seller's lawyer reads the note, the security agreement and any standby or subordination agreement together.
- The buyer's lawyer reads the same documents for the buyer.
- The seller's accountant checks how the price is allocated among the assets and what tax is due in the year of sale.
- The buyer's lender confirms the note's terms fit its approval before closing, so nothing changes at the table.
The worksheet recommends no rate, length or structure. The guides behind it are carrying a note when you sell your business and how a seller note works inside an SBA acquisition loan.