The first reaction by most sellers of a pharmacy business when approached about a seller note is “no I do not want to do that.“
However, in some scenarios a seller note is not necessarily a bad thing. Understanding the purpose and what a seller note is can help you make this decision.
A seller note is defined according to valueladder.com as a form of debt financing used in small business acquisitions in which the seller agrees to receive a portion of the purchase price as a series of installment payments.
Really it is a loan between buyer and seller.
When selling to an individual or other independent pharmacy the buyer’s bank will in many cases require or want seller financing. Healthcare transactions require sellers on a hybrid of after sale items including input to transfer the goodwill of the business, obtaining new licenses and insurance contracts. In addition to this healthcare businesses will have after sale audits, inspections, etc. that may be the sellers responsibility. For these reasons a seller note is important to the buyer and to the bank who is providing financing.
You as the seller may also benefits. Seller notes are paid over time reducing your tax burden at the time of the sale and you can earn interest (in many cases 7% or 8%) which is not a bad return in retirement. Lastly the terms of these notes may be 5-10 years but in many cases can have balloons whereby the buyer refinances the seller note and pays you out in a shorter timeframe