Seller Financing vs Earnouts for Online Business Sales (2026)

A pet supplement brand on Amazon and Shopify, earning its owner $300,000 a year, drew bids of $780,000, $900,000 and $1,000,000 in September 2026.

Three offers for one $300,000 brand

	Offer A	Offer B	Offer C
Headline price	$780,000	$900,000	$1,000,000
Wired at closing	$780,000	$630,000	$700,000
Owed afterwards	Nothing	$270,000 note, 8%, 36 months	Up to $300,000 across two revenue milestones
Where the buyer's money came from	SBA 7(a) loan and savings	Savings plus a home equity line	A two-brand holding company
Headline as a multiple of SDE	2.6x	3.0x	3.33x
Best case for the seller	$780,000	$934,589 with interest	$1,000,000
A bad but plausible case	$780,000	$748,451, buyer stops after payment 14	$700,000, neither target hit

The brand and its buyers are a composite we built for this guide; every figure comes from the terms shown. Trailing revenue to August 2026 was $2.1 million. Offer C's buyer wanted $2.3 million by month 12 and $2.6 million by month 24, with $150,000 riding on each.

Assumption we used	Figure	Basis
Discount rate	10% a year	Roughly what she could earn elsewhere at similar risk
Odds of the month 12 target	70%	Needs 9.5% growth; last year's was 9%
Odds of the month 24 target	40%	Needs another 13% on top

Offer	Value today	Below the headline by
A, all cash	$780,000	$0
B, seller note	$892,211	$7,789
C, earnout	$845,041	$154,959

We'd rank Offer B first. It pays her $112,211 more than the cash buyer, in 36 monthly instalments of $8,461 from someone she first spoke to in August. Our guide to how to value an online business covers where 2.6x to 3.3x comes from.

Seller financing vs an earnout

	Seller note	Earnout
What the seller holds	A promissory note for a fixed sum	A promise of payments if targets are hit
Interest	Yes, at or above the IRS floor	Rarely
Who carries the business risk	The buyer; the debt is owed even if sales fall	The seller; a weak year cuts the payout
Security	UCC-1 over the assets, personal guarantee	Usually none unless negotiated
Typical length on an online sale	24 to 60 months	6 to 24 months
Tax for a US seller	Instalment method under section 453	Purchase price, unless tied to staying on
What it signals about the buyer	Short of cash	Unsure the numbers will hold

The counter-offer we'd have tried

Offer C's buyer had the cash for a bigger down payment and doubted the growth. A mixed structure gives both sides something.

Offer D (our counter)	Figure
Headline price	$950,000
Wired at closing	$650,000
Seller note	$200,000 at 8% over 24 months, $9,045 a month, $17,091 of interest
Earnout	$100,000 if trailing revenue reaches $2.3 million at month 12
Value today at the same 10% and 70%	$909,659
Worst case	$650,000 plus whatever the note has paid

Offer D comes out $17,448 ahead of Offer B on our assumptions, with the note paid off a year sooner. The buyer, who ran two other brands from the same warehouse in Reno, turned it down.

How Offer B was negotiated

Date	Step	What changed
August 12	First call	Buyer asked for 18 months of P&L and every Amazon payout report
September 2	Opening letter of intent	$860,000: $480,000 down, $380,000 over five years at 6%, no guarantee
September 8	Seller's counter	$920,000 with $650,000 down, three years at 9%, guarantees from both buyers
September 16	Terms agreed	$900,000: $630,000 down, $270,000 at 8% over 36 months, both guarantees kept
September 30	Closing	Escrow released $630,000; the UCC-1 was filed in Delaware the same week

The buyers gave up a point on the rate to keep their down payment under $650,000. She took that trade with two signatures behind the remaining $270,000.

Seller notes on online businesses run one to five years

Flippa's seller financing walkthrough has a buyer put $40,000 down on a $100,000 site and pay $1,000 a month plus interest over five years, with 6% as its sample rate. Notes on stores and content sites tend to be shorter. Two or three years is common, with the first payment 30 days after closing.

Go under the IRS floors in Rev. Rul. 2026-19 PDF and part of every principal payment gets taxed as interest under section 483.

Note term	Federal floor, October 2026	Typical seller ask
Up to 3 years	4.25%	7% to 10%
3 to 9 years	4.61%	Usually 8% or more
Longer than 9 years	5.22%	Rare on a website

Sale	Note	Rate and term	Monthly payment	Interest over the term
$150,000 Etsy printables shop	$45,000 (30%)	8%, 24 months	$2,035	$3,845
$400,000 recipe site on Mediavine ads	$120,000 (30%)	8%, 36 months	$3,760	$15,373
$900,000 pet supplement brand (Offer B)	$270,000 (30%)	8%, 36 months	$8,461	$34,589
$1.5 million B2B SaaS tool	$300,000 (20%)	9%, 48 months	$7,466	$58,345
$3 million Amazon home goods brand	$450,000 (15%)	9%, 60 months	$9,341	$110,476

Above $1 million, an SBA lender or a fund usually supplies most of the price, and the seller's share of the financing drops to 15% or 20%.

Paperwork that makes a note collectable

Her promissory note ran to two pages. The rest of the file looked like this.

Document or clause	Job	In the pet supplement deal
Security agreement	Lets the seller take back assets if payments stop	Trademark, domain, Shopify store and stock; not the Amazon account itself
UCC-1	Puts that claim on public record	Filed in Delaware, where the buyer's LLC was formed, under UCC section 9-307
Personal guarantee	Reaches the buyer's own assets, past the LLC	Signed by the buyer and her husband
Acceleration	Calls in the full balance after a default	15 days to cure, then $172,598 due at once if it happens after payment 14
Monthly reporting	Early warning of a slide	Amazon payout report and a P&L by the 20th
Negative covenants	Stops asset stripping before payoff	No sale of the brand, no new liens, ad spend kept above $15,000 a month
Subordination	Ranks the note behind a bank	Only needed when an SBA lender is involved

A domain can move registrars in an afternoon. Amazon can suspend a seller account over a single listing or compliance complaint. Escrow.com has held domains for instalment buyers since at least 2011, according to DomainSherpa, and its domain holding service still runs terms of three months to five years.

If the buyer stops paying

Day	What happens	Offer B in December 2027
0	A payment is missed	Payment 15, $8,461, doesn't arrive
5	Late fee kicks in	5%, or $423
15	Cure period ends; formal notice goes out	Sent by the seller's lawyer to the LLC and both guarantors
16	Balance accelerated	$172,598 due at once
20	Guarantors asked to pay	Demand letters to the buyer and her husband
30 onward	Collateral enforced under the UCC-1	Domain, trademark and warehouse stock taken back

Asset	Getting it back	What we put in the deal
Domain	Quick if a third party holds it	Escrow.com holding until the last payment
Amazon seller account	Can't be pledged: Amazon's seller agreement, amended from August 24, 2026, bars transferring or pledging account rights, as EcomCrew reported	Security over the trademark, domain and stock instead
Shopify store	Only the store owner can transfer it (Shopify)	Monthly export of products and customers to the seller
Stripe subscriptions	Customer and card data can be copied only from the buyer's own Stripe account (Stripe); subscriptions must be rebuilt	MRR reported every month
YouTube channel	A Brand Account channel can change owners; AdSense accounts can't be transferred	Seller kept as a manager until payoff
Inventory at a 3PL	Physical goods, the easiest to seize	Warehouse named in the security agreement

Mistakes that sink seller-financed deals

Mistake	What it cost	Example
No UCC-1 filed	A later lender ranked ahead of the seller	A $90,000 note sitting behind a $250,000 inventory loan the buyer took out in month 4
Guarantee from the buyer's LLC only	Nothing to collect once the LLC was empty	A newsletter buyer's company held $1,200 when payments stopped
"Net profit" left undefined	The buyer charged costs that didn't exist before	A $4,000-a-month "shared services" fee wiped out a $60,000 earnout
No monthly reporting	The seller heard about the slump at default	Traffic fell 70% after a March core update; the seller found out in July
Interest below the IRS floor	Part of the principal reclassified as interest	A 2% note on a $100,000 balance, taxed as if it carried the federal rate

SBA counts seller money as at most half the buyer's 10%

An SBA 7(a) loan goes up to $5 million and needs 10% of the project cost from the buyer. The rules below come from SOP 50 10 8.1, Appendix 15, which covers loans numbered from October 1, 2026 and keeps the seller note rules of SOP 50 10 8 summarized by Live Oak Bank.

SBA rule	On a $900,000 deal like Offer B
Seller note counted as buyer equity	Full standby: no principal or interest for the life of the loan, often 10 years
Seller money inside the 10% injection	About $45,000 at most
A note the buyer is paying down	Counts in debt service coverage, which must be at least 1.25x for an acquisition
Founder keeping 5% of the brand	Full guarantee of the buyer's bank loan for at least two years
Price of $3 million or more	Lender orders a quality of earnings review (Doeren Mayhew)

Offer A's lender refused any seller note. That deal would have closed with one wire.

Earnouts were in 24% of private deals in 2025

SRS Acquiom's 2026 study covered more than 2,300 private deals closed from 2020 to 2025; Fasken published the numbers we use here.

From the 2026 study	Figure
Deals with an earnout, 2025	24%
Same, 2024	22%
Median earnout against the closing payment, 2025	34%
Most common length	1 to 2 years, in 38% of earnouts
A year or less	23%
2 to 3 years	20%

Online sales near $1 million usually measure over 6 to 24 months. Offer C defers an amount equal to 43% of its closing payment.

Revenue targets for founders who leave

Her handover was 60 days. Under a profit target, a buyer who hired a $9,000-a-month agency or moved stock to a dearer 3PL would shrink her first $150,000 along with the margin.

Business sold	Earnout we'd expect to see	Measured on
$250,000 newsletter, 40,000 subscribers	$40,000 if paid subscribers stay above 2,600 for 6 months	Stripe payouts; see selling a newsletter
$600,000 content site	$75,000 if monthly ad revenue averages $18,000 in year one	Ad network statements
$1.2 million SaaS tool	$200,000 tied to MRR of $45,000 at month 12, founder on a consulting contract	Billing system export
$1 million Amazon brand (Offer C)	Two payments of $150,000 at $2.3 million and $2.6 million trailing revenue	Seller Central and Shopify

What happened when earnouts went to court

Case	The earnout	Result
Fortis v. Johnson & Johnson, Chancery, September 4, 2024	Up to $2.35 billion on surgical robot milestones, efforts judged against J&J's priority devices	Efforts breach on the iPlatform robot and fraud on a Monarch milestone; about $1 billion awarded (Jones Day)
Johnson & Johnson v. Fortis, Supreme Court, January 12, 2026	$400 million for a 510(k) clearance by the end of 2021	$300 million of the award reversed; the contract named 510(k), and the FDA wanted De Novo clearance (Quinn Emanuel)
Fortis v. Medtronic, Chancery, July 29, 2024	$100 million on insulin pen sales; buyer barred only from acting mainly to avoid payment	Thrown out at the pleading stage; the sellers didn't plead facts showing that motive (Jones Day)
SRS v. Alexion, Chancery, September 5, 2024	Up to $800 million; efforts measured against similar-sized drug companies	Breach, after the new parent dropped the program for merger savings; $180.9 million awarded in June 2025 (Goodwin)
AM Buyer v. Argosy, Superior Court, September 3, 2024	EBITDA earnout, independent accountant's figure binding	Accountant's number enforced; buyer ordered to pay

Clauses we push for in an earnout

Clause	Seller-side wording	Applied to Offer C
Efforts	Run the brand in the ordinary course, with spending floors written in	Ads at $15,000 a month or more; 60 days of stock on hand
Measurement	Formula, accounting method and data source named	Seller Central and Shopify payouts, before refunds
Access	Monthly figures and a read-only login	Seller Central business reports
Acceleration	Whole earnout due on a sale, shutdown or transfer of sales	Aggregator buys the brand in month 10; $300,000 falls due
Catch-up	A miss in year one can be recovered in year two	$2.25 million at month 12, $2.6 million at month 24 pays both
Disputes	Independent accountant, a deadline, loser pays	45 days for a decision
Security	Earnout sits under the same security agreement as any note	One UCC-1 for both

A seller note spreads the gain over four tax years

Under section 453, note principal is usually reported on the instalment method. Gain lands in the year each payment arrives, interest is ordinary income when paid, and inventory and depreciation recapture are taxed in the year of sale regardless.

Money	Federal treatment
Offer B's $630,000 at closing	Goodwill gain in 2026, plus inventory and recapture
$270,000 of principal	Gain spread over 2026 to 2029 on Form 6252
$34,589 of interest	Ordinary income as received
Earnout owed whether or not she works there	Normally purchase price, often capital gain
Earnout that ends if she quits	Can be taxed as compensation (RSM)

In our tax guide, a $150,000 note on a hypothetical $600,000 Shopify sale would cut federal tax by about $6,100.

How each structure changes the closing

Stage	All cash	Seller note	Earnout
Letter of intent	Price, date	Amount, rate, term, collateral, guarantor	Metric, targets, dates, amounts, reporting
Due diligence	Buyer checks the business	Seller checks the buyer's credit, bank statements and past ventures	Base-year numbers signed off by both
Closing day	Escrow releases funds on transfer	Down payment released; UCC-1 filed that week	Upfront payment; reporting logins created
Afterwards	30 to 60 days of handover	One to five years of monthly payments	A statement at each measurement date

Buyers work from something like our due diligence checklist. A seller lending $270,000 needs a shorter list on the buyer: two months of bank statements, a soft credit pull and any businesses they ran before.

Checks before you sign a seller note

Check	What to ask for	A result we'd accept
Cash	Two months of bank statements	Down payment plus six months of running costs in the account
Credit	A soft credit pull, with consent	No defaults or collections in five years
Track record	Businesses the buyer has run	A Shopify store doing $40,000 a month, run for three years
Collateral	Every asset listed in the security agreement	Domain, trademark, social handles, email list, stock at the 3PL
Default rate	Interest after a missed payment	12% from day 16
Prepayment	Whether the buyer can pay early	Allowed, no penalty
Death or disability	Who pays if the buyer can't	Balance due from the estate; a term life policy assigned to the seller
Tax election	Instalment reporting set up with the seller's accountant	Form 6252 ready for the 2026 return

Five deferred offers we'd turn down

Situation	What goes wrong	Example
Buyer can't show the down payment	Payments depend on the store never dipping	$90,000 in savings behind a $250,000 down payment
Target above the best year on record	That slice of the price is unlikely to arrive	$2.9 million asked of a brand that peaked at $2.3 million in 2024
Buyer will merge the brand into another	Sales stop being measurable	A supplement line folded into an aggregator's storefront
Buyer in another country	Collection costs more than the balance	A Hong Kong seller owed $40,000 by a buyer in Ohio; see our guide to selling from outside the US
Over half the price deferred	The seller is financing the purchase	$450,000 deferred on an $800,000 sale

Terms buyers propose and what to counter with

Buyer's opening term	Seller's counter	Difference on a $500,000 sale
$100,000 down, $400,000 over 5 years at 6%	$300,000 down, $200,000 over 3 years at 9%	$200,000 more on day one
Interest only for the first year	Amortizing from month 1	About $60,000 of principal repaid in year one instead of none
No personal guarantee	Guarantee capped at the unpaid balance	A claim on the buyer's own assets
Earnout on EBITDA	Earnout on revenue or gross profit	The buyer's new costs stop counting against the seller
36-month earnout	12 months, or 24 with a catch-up	Fewer of the buyer's decisions inside the measuring window
Unsecured note	UCC-1 plus domain held in escrow	Something to take back if payments stop

Questions sellers ask us

What does seller financing look like on a small online business?

On a $400,000 recipe site it usually means about $280,000 wired at closing and $120,000 paid to the seller monthly over two or three years. The seller keeps a security interest in the site and the domain until the final payment.

Is seller financing worth the risk?

It added $112,211 to the all-cash offer in our worked example, against three years of credit risk. We'd accept it when the buyer puts at least half the price down and signs a personal guarantee.

What rate goes on a seller note?

The pet supplement founder asked for 9% and settled at 8% on 36 months. The legal minimum that month was 4.25% for terms up to three years, set by the IRS's monthly federal rates.

How long do earnouts usually last?

38% of the earnouts in SRS Acquiom's 2026 study ran one to two years. On a Shopify store or a content site we push for 12 months, since a new owner's changes to ads, pricing or suppliers muddy the numbers after that.

Can a seller note sit alongside an SBA loan?

Half of the buyer's 10% injection can come from a seller note on full standby, meaning no payments for the life of the bank loan. On a $900,000 purchase that is $45,000 the seller may not see for 10 years.

What happens to an earnout if the buyer sells the business?

Without an acceleration clause, the new owner may owe nothing toward targets set by the old one. With it, an aggregator buying the brand in month 10 would have made all $300,000 of Offer C due that day.

Do buyers of online businesses expect seller financing?

Below $150,000, buyers usually pay in full through escrow. It comes up most between $300,000 and $2 million, where a buyer can cover a third of the price but not the whole thing, and an SBA loan is too slow or too restrictive.

What if the seller dies before the note is paid off?

Her heirs collect. Had the founder died in month 15, the remaining $172,598 would have gone to her estate, with the guarantees and the UCC-1 carried on in the estate's name.

Offer B closed on September 30 with personal guarantees from both buyers and a UCC-1 on the brand; the first $8,461 fell due 30 days later.

This article reflects contract terms and published rules as of October 2026 and is not legal or tax advice. Have a lawyer who has drafted promissory notes and earnouts read any deal with deferred payments.

To see what your business could fetch in cash, and what a structured offer might add, request a free valuation.

Seller Financing and Earnouts: How to Structure an Online Business Sale (2026)