# The 70/20/10 Deal Structure: 70% Debt, 20% Seller Finance, 10% Rollover

Source: https://apply.grosfjeld-li.com/guides/70-20-10-deal-structure · By Josh Li, G&L M&A Advisory · Updated 2026-10-14

**Short answer:** A 70/20/10 deal structure funds a business purchase with 70% commercial (senior) debt, 20% seller finance repaid over a few years from the business’s cash flow, and 10% seller rollover, where the seller keeps a 10% stake. The buyer puts in no cash. Lenders often add a working-capital line on top, which makes the deal over-financed.

**Key points:**
- 70% from a commercial lender, 20% as a seller note, 10% rolled into a stake the seller keeps.
- Retiring owners like it: most of their money at settlement, steady income after, and a slice of upside.
- A working-capital line from the lender often sits on top, making the deal over-financed.
- It carries more fixed repayments than 60/40, so test it carefully at a DSCR of around 1.5x.
- The small rollover keeps the seller invested through the handover without a large minority partner.

## What is a 70/20/10 deal structure?

A 70/20/10 deal structure uses all three funding parts of a no-money-down acquisition:

- **70% commercial debt (senior debt):** a lender funds most of the price at settlement, secured on the business.
- **20% seller finance (vendor finance):** the seller defers part of the price and is repaid over a few years from the business’s cash flow. See [seller finance explained](https://apply.grosfjeld-li.com/guides/seller-finance-explained).
- **10% seller rollover:** the seller keeps a 10% stake instead of taking that part of the price in cash. See [seller rollover explained](https://apply.grosfjeld-li.com/guides/seller-rollover-explained).

The buyer contributes no cash.

## How does a 70/20/10 deal work?

### Illustrative example

*Illustrative only. Real terms depend on the business, the lender and the seller.*

A business is bought for **$1.5M**.

| Funding part | Share | Amount | How the seller is paid |
|---|---|---|---|
| Commercial debt | 70% | $1.05M | Cash at settlement |
| Seller finance | 20% | $300k | Instalments over a few years from cash flow |
| Seller rollover | 10% | $150k | A 10% stake: dividends and future sale value |
| Buyer’s cash | 0% | $0 | — |

### Why it is often over-financed

The lender often adds a **working-capital line** on top of the term loan. Working capital is the cash a business needs to pay wages, rent and suppliers before customers pay. With that line in place, total funding exceeds the purchase price. That is what "over-financed" means. See [over-financed acquisitions](https://apply.grosfjeld-li.com/guides/over-financed-acquisition).

### Testing the repayments

This structure has two sets of fixed repayments: the bank loan and the seller note. Both must fit inside the business’s cash profit with a buffer.

*Illustrative:* if the bank loan costs about $230k a year and the $300k seller note is repaid over three years (about $100k a year plus any interest), total annual repayments are about $330k. To reach a DSCR of 1.5x (cash profit divided by annual repayments), the business needs about $495k of reliable cash profit. If it makes less, lengthen the seller note, add a grace period, or lower the price.

## Why do retiring owners like 70/20/10?

In our experience, this is the structure retiring owners say yes to most readily, because it answers the three things they worry about:

1. **"Will I get my money?"** 70% arrives at settlement.
2. **"What will I live on?"** The seller note pays a steady income for the next few years.
3. **"Am I leaving money on the table?"** The 10% stake shares in whatever the business becomes.

A 10% stake also keeps the seller interested in a smooth handover without making them a large partner who expects a say in every decision.

## How does 70/20/10 compare with 60/40?

| | 60/40 | 70/20/10 |
|---|---|---|
| Commercial debt | 60% | 70% |
| Seller finance | 0% | 20% |
| Seller rollover | 40% | 10% |
| Cash to seller at settlement | Lower | Higher |
| Seller’s ongoing stake | Large | Small |
| Buyer’s fixed repayments | Lower | Higher |
| Best for | Mid-career sellers wanting a partner | Retiring sellers wanting income and a clean-ish exit |

See the [60/40 deal structure](https://apply.grosfjeld-li.com/guides/60-40-deal-structure) for the other side.

## Where does the seller note rank?

The lender is repaid first. That is what "senior" means. The seller note usually sits behind it, which lenders call **subordinated**. The lender will want a written agreement with the seller, often called a deed of priority or subordination agreement, that sets out:

- the order in which the bank and the seller are paid;
- whether seller repayments can continue if the business misses a bank covenant (a financial test written into the loan);
- what each party can do if the business defaults.

Sellers sometimes resist ranking second. Explain why it protects them: the bank’s involvement means a professional has also tested the cash flow, and the seller is still paid from the same business they know well.

## How do you put a 70/20/10 deal together, step by step?

1. **Learn the seller’s retirement goals.** How much do they need at settlement, and what income would they like afterwards?
2. **Calculate reliable cash profit.** Remove one-off items and the owner’s personal costs.
3. **Size the bank loan and the seller note together.** Their combined repayments must clear a DSCR of around 1.5x.
4. **Ask the lender about a working-capital line**, so the business is properly funded from day one.
5. **Put the structure in the [letter of intent](https://apply.grosfjeld-li.com/guides/letter-of-intent-buying-a-business)**, including the note’s term and the rollover terms.
6. **Run due diligence, sign the subordination agreement and close.**

## What are the risks of a 70/20/10 deal?

- **Higher leverage.** 90% of the price has fixed repayments. A bad year bites harder than in 60/40.
- **Two creditors.** The bank and the seller both need paying. The seller note usually ranks behind the bank, and the bank must agree to it.
- **Security and guarantees.** With more debt, a lender may ask for more security. Negotiate this early.
- **A small but real minority partner.** Even 10% needs a shareholders’ agreement covering dividends, exit and buy-back.

## What kills 70/20/10 deals?

- **Squeezing the seller note into too short a term.** The repayments fail the DSCR test, and the lender walks.
- **Forgetting working capital.** If there is no working-capital line, the new owner is short of cash in month two.
- **Leading with structure before trust.** Understand the seller’s goals first, then show how 70/20/10 meets them.

> General information only, not financial, legal or tax advice.

## How G&L M&A Advisory uses 70/20/10

G&L M&A Advisory structures deals over-financed at a DSCR of around 1.5x, combining commercial debt, seller finance and seller rollover to suit the seller. Read the full comparison in [how to buy a business with no money down](https://apply.grosfjeld-li.com/guides/how-to-buy-a-business-with-no-money-down).

If you own a $1M+ business and want to buy a competitor or a retiring owner’s business, [see if you qualify](https://apply.grosfjeld-li.com/) for an acquisition strategy call.

## FAQ

### What is a 70/20/10 deal structure?

It funds an acquisition with 70% commercial debt, 20% seller finance repaid over time, and 10% seller rollover, where the seller keeps a 10% stake. The buyer puts in no cash.

### Why is 70/20/10 popular with retiring business owners?

They receive most of the price at settlement, a steady income from the seller note afterwards, and a 10% share of future upside.

### Is a 70/20/10 deal over-financed?

Often. The lender commonly adds a working-capital line on top of the term loan, so total funding exceeds the purchase price.

### How long is the seller note in a 70/20/10 deal?

Commonly a few years. Set the term so total repayments still leave a DSCR of around 1.5x.

### Is 70/20/10 riskier than 60/40 for the buyer?

It carries more fixed repayments, because 90% of the price is debt or seller note rather than 60%. It needs stronger cash profit to service it safely.

### Can you change the 70/20/10 ratios?

Yes. The ratios are a starting point. Shift more into seller finance or rollover if the business needs lower bank repayments to clear the DSCR test.