Seller financing calculator
Model the note the seller is offering. The payment, the schedule, and what falls due at maturity — including the interest a standby period defers rather than forgives.
The calculator
Regular payment
$9,666
Principal and interest, each month.
- First 12 months of payments
- $115,997
- First full year after standby
- —
- Due at maturity, on top of that month's payment
- $0
- Total interest paid
- $79,984
- Total repaid over the life of the note
- $579,984
- Note as a share of the purchase price
- 20.0%
- First-year coverage, this note and existing debt only
- —
Monthly compounding on a nominal annual rate, payment at the end of each month. Interest and payment are rounded to the cent each month, and the final installment clears the balance.
Payment schedule, month by month
| Month | Phase | Opening balance | Interest | Principal | Payment | At maturity | Closing balance |
|---|---|---|---|---|---|---|---|
| 1 | Amortizing | $500,000 | $2,500 | $7,166 | $9,666 | — | $492,834 |
| 2 | Amortizing | $492,834 | $2,464 | $7,202 | $9,666 | — | $485,631 |
| 3 | Amortizing | $485,631 | $2,428 | $7,238 | $9,666 | — | $478,393 |
| 4 | Amortizing | $478,393 | $2,392 | $7,274 | $9,666 | — | $471,119 |
| 5 | Amortizing | $471,119 | $2,356 | $7,311 | $9,666 | — | $463,808 |
| 6 | Amortizing | $463,808 | $2,319 | $7,347 | $9,666 | — | $456,461 |
| 7 | Amortizing | $456,461 | $2,282 | $7,384 | $9,666 | — | $449,076 |
| 8 | Amortizing | $449,076 | $2,245 | $7,421 | $9,666 | — | $441,655 |
| 9 | Amortizing | $441,655 | $2,208 | $7,458 | $9,666 | — | $434,197 |
| 10 | Amortizing | $434,197 | $2,171 | $7,495 | $9,666 | — | $426,702 |
| 11 | Amortizing | $426,702 | $2,134 | $7,533 | $9,666 | — | $419,169 |
| 12 | Amortizing | $419,169 | $2,096 | $7,571 | $9,666 | — | $411,598 |
| 13 | Amortizing | $411,598 | $2,058 | $7,608 | $9,666 | — | $403,990 |
| 14 | Amortizing | $403,990 | $2,020 | $7,646 | $9,666 | — | $396,344 |
| 15 | Amortizing | $396,344 | $1,982 | $7,685 | $9,666 | — | $388,659 |
| 16 | Amortizing | $388,659 | $1,943 | $7,723 | $9,666 | — | $380,936 |
| 17 | Amortizing | $380,936 | $1,905 | $7,762 | $9,666 | — | $373,174 |
| 18 | Amortizing | $373,174 | $1,866 | $7,801 | $9,666 | — | $365,374 |
| 19 | Amortizing | $365,374 | $1,827 | $7,840 | $9,666 | — | $357,534 |
| 20 | Amortizing | $357,534 | $1,788 | $7,879 | $9,666 | — | $349,655 |
| 21 | Amortizing | $349,655 | $1,748 | $7,918 | $9,666 | — | $341,737 |
| 22 | Amortizing | $341,737 | $1,709 | $7,958 | $9,666 | — | $333,779 |
| 23 | Amortizing | $333,779 | $1,669 | $7,998 | $9,666 | — | $325,782 |
| 24 | Amortizing | $325,782 | $1,629 | $8,037 | $9,666 | — | $317,744 |
Showing the first 24 months of 60. The rest load with the page's script.
Continue analyzing this deal
A seller note is one tranche of the structure. These take the same deal further.
Analyze my acquisition financing
Duneland can review the structure and identify the lenders that fund alongside a seller note. That review is the judgment the arithmetic above does not make.
A worked example
A seller carries $500,000 at 6%, due in 5 years, with the payment calculated over10 years. The monthly payment is $5,551, which is $66,612 in the first year.
Because the payment is struck over twice the term, the note does not repay itself. At maturity $287,130 falls due on top of that month's payment. That is the balloon, and it is the number a buyer most often does not see until it is close.
Put the same note on a 24-month standby and the first year's payments fall to $0. Nothing is cheaper: the interest accrues, and the amount due at maturity rises to $439,984. A deferral moves the obligation; it does not remove it.
How the payment is calculated
The monthly payment on an amortizing note is the standard annuity formula:
PMT = P × r ÷ (1 − (1 + r)−n)
- P is the note principal.
- r is the monthly rate: the annual rate divided by twelve.
- n is the number of amortizing installments — the amortization period in months, not the term.
At a zero rate the formula divides by zero, so a 0% note simply repays principal in equal installments: PMT = P ÷ n.
Each month the interest is the opening balance times the monthly rate, and the rest of the payment reduces the principal. Interest and payment are rounded to the cent as they accrue, and the final installment clears whatever is left, so the schedule's columns add up rather than nearly add up.
The convention throughout is a nominal annual rate with monthly compounding and the payment at the end of each month. There is no daily accrual, no rate reset and no fee financed into the principal unless you add it to the note amount yourself. The rate is not an APR, because an APR includes costs this page does not know about.
How a lender reads a seller note
A senior lender looks at a seller note for three things: how much of the price it represents, where it ranks, and when it takes cash.
Rank and timing are usually addressed by a subordination or standby agreement, which puts the seller behind the senior lender and may stop the note taking payments for a period. The SBA publishes a standby creditor's agreement form for this purpose. That form is a mechanism for recording the arrangement. It does not by itself establish that a structure is eligible, or that any particular treatment of the note as equity applies.
What a specific lender requires of a specific note is a matter for that lender. This page models what the note costs. It does not model whether anyone will fund alongside it.
Illustrative results for planning. Not a financing commitment, financial advice or legal advice.
Duneland Financial is an independent capital advisory firm and does not directly extend credit. Financing is provided by third-party lenders and capital providers and remains subject to their individual underwriting, approval and documentation requirements. Information provided on this website is for informational purposes only and does not constitute a financing commitment, financial advice or legal advice.
Related reading
The arithmetic is on this page. These cover what a lender does with it.
- SBA Loan vs. Conventional Loan: Breaking It Down with a $5 Million ExampleSBA against conventional financing on a $5 million acquisition: the rates, the interest each route costs over ten years, and which one suits which buyer.
- 10 Ways Sellers Can Make a Business Easier to FinanceTen things a seller can do to make a business financeable, so a buyer's lender approves the deal rather than declining it.
- Acquisition Financing Document Checklist: What Lenders Need and WhyThe documents a lender needs after you sign the LOI, what each one proves, and why the list is shorter than it looks.
Seller financing: common questions
What is the difference between a seller note’s term and its amortization period?
The term is when the note is due in full. The amortization period is the schedule the monthly payment is calculated on. When the amortization period is longer than the term, the payment is lower than it would otherwise be and the unpaid balance falls due as a lump sum at maturity. A five-year note amortized over ten years pays as though it had ten years to run, then stops and demands the rest.
How is the balloon payment on a seller note calculated?
It is whatever principal is still outstanding when the note matures, plus any interest that was deferred rather than paid. The calculator above takes the ordinary payment for the maturity month first, then reports the remaining balance separately, because those are two different cash obligations in the same month and a single combined figure hides one of them.
Does interest still accrue while a seller note is on standby?
It depends on what the agreement says, and the three possibilities produce materially different amounts owed. Interest may be waived, in which case nothing accumulates. It may accrue and sit unpaid until maturity, which adds to the balloon. Or it may be added to the principal each month, which grows the balance the later payments are calculated against. The calculator asks which one applies rather than assuming the cheapest.
Is a seller note the same as buyer equity?
No. A seller note is debt, and it stays debt even when it is on standby and taking no payments. It ranks behind the senior lender, so a lender may treat it more favorably than other debt, but it is not the buyer’s cash and it is not automatically counted as a qualifying equity injection. Whether a particular lender gives it any equity credit is a question for that lender.
How does a seller note affect the debt service coverage ratio?
It works in both directions, which is why it has to be modeled rather than assumed. A larger seller note reduces the senior loan the buyer needs, which lowers the senior payment. But the note has its own payment, so total debt service can rise even as the senior loan falls. A note on standby lowers service in the early years and raises it later, so the first year and the worst year are different numbers.
Will a lender accept a seller note in the capital stack?
Many acquisition lenders will, on their own terms. Those terms commonly cover how much of the price the note may represent, whether it must be subordinated, and whether it must sit on standby for a period. None of that is settled by the arithmetic on this page. The calculator shows what a proposed note costs; whether a specific lender will fund alongside it is what an advisor establishes.
Have a deal in front of you?
Whether you have a signed LOI, are preparing an offer or are still evaluating the opportunity, send us the basic numbers and where you are in the process. We’ll look at the business, buyer and proposed structure and determine what the financing path may look like.