I sold my HVAC company last year with 40% seller financing. At first it seemed like a good way to get a higher price. But now I get quarterly financial reports, I have to approve any equipment purchase over $10k, and the buyer calls me every time a key employee threatens to quit. It feels like I'm still the owner but without any of the upside. The final straw was when they asked me to co-sign a new lease for a second location. I'm seriously considering accepting a lower price from a different buyer just to be done with it. How do others handle this?
Seller Financing
Why seller financing feels like staying married to your ex-business
The co-sign request is a hard no. Once you co-sign, you're back on the hook for rent even if the business goes under. Seller financing should not include guarantees on new leases. That's beyond normal covenants.
I had a similar situation with a machine shop I sold. The buyer kept coming back for advice on pricing jobs and I felt obligated because I wanted my note paid. It took about 18 months before I finally told him I would only respond to written requests once a quarter. Setting that boundary helped a lot.
This is exactly why I turned down two offers with seller financing. The money looked good on paper but I didnt want a part-time job managing my successor.
Honestly, the buyer has more leverage than you think. If you start refusing approvals or reports, they might stop paying and then you're in a legal fight. Unless your note has a clear default clause, tread carefully.
How much of the purchase prie is still outstanding? If it's a small remainder, you might offer a discount for early payoff just to close the file. I did that once and it stung but the peace of mind was worth it.
The reports are one thing, but co-signing a lease is completely different. That's not in any standard seller note. You should review the original agreement to see if there's any language that obligates you to approve expansions or guarantee new debt. I'd be surprised if there is. If not, just decline the co-sign and point to the contract.
Have you considered selling the note to a third party? You'd take a haircut but you'd be free. There are companies that buy seller-financed notes. The price depends on the buyer's payment history and the business's health.
I think the real issue is that the buyer never learned to run the business independently. If they're calling you about employee issues, they aren't managing. You might need to formally notify them that your advisory role is limited, and then stick to it, even if it feels cold.
What does your note say about information rights? Typically you get annual financials, not quarterly. The buyer might be over-communicating to keep you comfortable, but that's setting a bad precedent for both of you.
Every seller financing deal I've seen ends up feeling like a bad marriage. The seller wants out, the buyer wants a safety net. If you're that unhappy, take the lower cash offer. Your time and sanity Have value.