The Buyer Will Ask You for a Loan. Here's How to Say Yes Safely.

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You've spent twenty years building the business. You agree on a price. Then the buyer's banker says the bank will fund most of it, and the rest has to come from somewhere. The somewhere is you.

Most owners don't see this coming. BDC says vendors often assume they'll get 100% of the price in cash at closing , and that this is rare in sales of small and mid-sized companies. It's much more common for the buyer to ask the seller to help finance the deal. If you're a few years from selling, that's worth knowing now, not at the closing table.

What you're actually agreeing to

A vendor take-back (VTB) means you hold back part of the price and the buyer pays it to you over time, with interest. You become a lender. BDC says vendor financing typically runs 10% to 15% of the transaction amount , repaid over three to five years, often with payments deferred for the first year.

Here's the part sellers dislike. In almost all cases the VTB is junior debt. The bank gets paid first, and BDC notes that most of the time the buyer must cover the bank before repaying you. Your note sits behind theirs.

The common advice is to refuse and hold out for cash. That advice is backwards for most sellers. A VTB widens the pool of buyers who can actually close, and a seller who carries part of the price often supports a stronger valuation . Banks tend to read a willing seller as a good sign. The refusal usually costs you the deal or the price.

The tax side is worth real money

If you're paid over several years, you may not have to report the whole gain in the year you sell. The CRA lets you claim a capital gains reserve for the portion of the proceeds you haven't received yet. Generally the maximum is a four-year reserve, so the gain is spread over five years . Sales to your children can stretch to nine years, and ten years of reporting.

A few rules from the same CRA page are easy to miss:

You can't claim a reserve if you sold to a corporation you control in any way.

You must file Form T2017 to deduct a reserve in any year.

The reserve you claim in a later year can't be more than what you claimed the year before.

Whether a reserve helps you depends on your other income, your lifetime exemption room, and how the deal is structured. That's an accountant's question, and it's one to ask before you sign a letter of intent, not after.

Paperwork is where deals between friends go wrong

When buyer and seller already know each other, the documents are the first thing people want to skip. It feels rude to ask a friend for security. It's a lot ruder when the payments stop.

Mondaq's summary of a Watson Goepel guide says a sound VTB has three core pieces: a purchase agreement, a promissory note, and a security agreement . It also notes that sellers often ask for personal guarantees and ongoing reporting. Before you agree to anything, get answers to these:

How much of the price is the note, and how does that compare with what the bank and the buyer are putting in?

What security do you hold, and where do you rank behind the bank?

Will the buyer give you regular financial statements while you're owed money?

What happens on a missed payment, and who decides?

Is any of the price an earn-out, tied to sales or profit targets? BDC describes earn-outs as a way to bridge a gap in how buyer and seller value the business . They also put part of your price at the mercy of the buyer's results.

Look at the buyer's whole package

BDC's advice to sellers is to ask for the buyer's entire financing plan. If the buyer is stacked with short-term debt, the business can struggle during the handover, and your note is the first thing to suffer. In BDC's example, an outside buyer or a business with lumpy revenue calls for less senior debt or a longer amortization. You aren't being nosy by asking. You're the lender.

Key takeaways

Expect to be asked for a loan, and decide your terms before the first offer arrives. Ten to fifteen percent of the price is a typical VTB. Ask your accountant about a reserve early, since the CRA's default is five years of reporting. Put the note, the security, and the reporting rights in writing, even if you've known the buyer for thirty years.

Our Chamber's monthly socials are a low-key place to meet owners on both sides of these deals, buyers and sellers, before anyone has a term sheet. Join us at the next one.

This is general information, not legal or financial advice. Talk to a qualified professional before you sell a business or lend money to a buyer.

Sources

BDC: How to finance the sale of your business

BDC: Vendor financing (VTB) for mergers and acquisitions

CRA: Claiming a capital gains reserve (page modified 2026-04-01)

Watson Goepel LLP via Mondaq: Vendor Takeback Financing in Canada (Apr 28, 2026)