Seller note payment calculator
A seller note lets the buyer pay part of the price over time, and lenders often require it to sit on standby with no payments for a while. This calculator shows what the note pays once payments start and what standby does to the total.
Seller note payment calculator
Calculates the monthly payment on a seller note, including a full-standby period with no payments. Defaults are illustrative placeholders; your purchase agreement and any lender subordination terms control.
Educational estimate only. Not an appraisal, valuation opinion, or loan approval.
How to use the seller note payment calculator
- Enter the note. Enter the seller note principal and interest rate.
- Set the term. Enter the total note term in years, including any standby period.
- Set the standby. Enter the months of full standby and whether interest accrues during that time.
- Read the payment. Read the balance when standby ends, the monthly payment after standby, total paid, and total interest.
What the calculator does
It takes the principal, rate, and total term, then removes the standby months from the repayment period. If interest accrues during standby, it compounds monthly and is added to the balance; if not, the balance stays at the original principal. The remaining balance is then paid off in equal monthly payments over the months left in the term. The result shows the balance when standby ends, the monthly and annual payment after that, total paid, and total interest. If standby covers the whole term, the calculator shows the full balance due at maturity. Payments are figured monthly, which matches most notes; a note with annual payments will show slightly different totals.
How to choose the inputs
Take the rate, term, and standby period from the letter of intent or draft note. If a bank loan is involved, the lender’s subordination agreement sets the standby terms. For SBA loans, SOP 50 10 8.1 counts a seller note toward the buyer’s equity only if it is on full standby, meaning no principal or interest payments, for the entire term of the 7(a) loan. In that case, set the total term long enough to cover standby plus repayment. Whether interest accrues during standby is negotiable; our LOI term checklist flags it as a point to settle early. An interest-only period is different from standby: the buyer pays interest, so the balance stays flat. To approximate one, set accrual to 0 and add the interest paid separately.
How buyers, sellers, and lenders use the result
Sellers use the result to see when cash will start and how much a long standby adds to their risk. A note is only as good as the business’s ability to pay, which is why seller financing deserves the same care as choosing the buyer. Buyers use the payment after standby to check that cash flow can carry the bank loan and the note once both are paying. Lenders look at the same number when they test coverage, and they decide whether a note that is not on standby counts as debt.
What it leaves out
The calculator assumes level monthly payments with no balloon, no prepayment, and no change in rate. It does not model security, personal guarantees, default remedies, or the tax treatment of installment sale gain and interest income, all of which affect what the note is worth to the seller. A note can also be renegotiated if the business struggles, which is one reason sellers discount deferred payments. Compare structures in SBA 7(a) vs. seller financing, and see the effect on cash at closing with the net proceeds calculator.
Related reading
Frequently asked questions
What does full standby mean on a seller note?
Full standby means the buyer makes no principal or interest payments on the seller note for a set period, usually while a bank loan is outstanding. Under SBA SOP 50 10 8.1, a seller note counts toward equity only if it stays on full standby for the term of the 7(a) loan.
Does interest keep building while a seller note is on standby?
It depends on the note. Many notes let interest accrue and add it to the balance, which raises later payments. Others set the rate at zero during standby. The difference can be large on a long standby, so settle it in the letter of intent rather than at closing.
What interest rate is typical on a funeral home seller note?
There is no reliable published rate for funeral home seller notes. Rates are negotiated and depend on the buyer’s credit, the security, the standby terms, and what the bank allows. Sellers often ask for more than a bank rate because they stand behind the lender if the business struggles.
How can a seller protect a seller note?
Common protections include a personal guarantee, a security interest in business assets, life insurance on the buyer, financial reporting rights, and clear default terms. When a bank loan comes first, the subordination agreement limits what the seller can do, so have your attorney review it alongside the note.