In most cases, the Seller of a business should expect to finance at least a small portion of the agreed upon purchase price. If the business generates strong cash flow and the Buyer is approved for an SBA 7(a) loan, the Seller can expect to receive 90 percent of the purchase price in cash at close of escrow, less closing costs and fees. The other 10 percent is a fully amortized Seller note, securitized by the assets of the business. The note is mandatory under the SBA 7(a) program. Although the terms of the note are negotiable, the SBA requires the note to be on “fully standby” for two years from close of escrow. No payments are made by the Buyer, and no interest accrues for two years. For example, if the Seller agrees to a five-year note at 8 percent interest, the note will be paid in full, plus interest, seven years from close of escrow. This rule was created to reduce the SBA’s risk; for the first two years, the Buyer is liable only for the SBA note payments. This arrangement is not without advantages for Seller. Besides earning considerable interest, the capital gains tax on the note payments is deferred until the year in which the payments are received.