Ways of Getting Paid When Selling a Business

Usually by wire transfer sourced from a combination of equity and a bank loan, SBA

loan, or mezz lender (sometimes multiples loans).

Typically an additional payout to the seller based on future performance. Think a % of EBTIDA, a % of net income, a % of revenue, retention of key clients, etc., etc. Sometimes comes with a floor (minimum) and/or a ceiling (maximum).

A promissory note where the seller is the lender and the buyer is the payor. Minimum IRS rate applies and varies depending on size and length of term-usually land on 5% or so. Length of term varies - sellers want it ASAP, buyers want it spread out.

Depending on the buyer, they may offer you stock in their company for some portion of the purchase price. Doesn’t help you get liquid, but could help you make more $$. TONS of due diligence by the sell-side team on this one to vet the buyer.

Doesn’t count as purchase price (i.e., doesn’t get taxed as capital gains), but sellers often consider it part of their total package, especially when the salary and bonus are significant.

Similar to salary/bonus in that it doesn’t count as purchase price, but as part of a package, it could be lucrative. Could be sales commissions or other business development incentives.

If you own the real estate, you can lease it back to the buyer. With the right lease from the right buyer, you can refi and cash out to gain additional cash relatively soon after closing.

You as the seller also get to keep excess cash (over and above working capital). Not part of the purchase price, but often a good-sized part of the total calculation.