Winery Seller Financing and Earnouts
In some winery sales, the seller agrees to receive part of the price over time rather than all of it at closing. Winery seller financing can help a buyer bridge a gap between the price and what a lender will finance, spread the cost of wine inventory that will sell over several years, or give the seller a continuing stake in a smooth transition. Earnouts, which tie part of the price to future performance, are another tool some parties consider.
This article is general information for buyers and sellers of existing, operating wineries. It is not legal or tax advice, and the structure of any seller note or earnout should be reviewed with qualified attorneys and accountants.
How a Seller Note Works
With a seller note, the buyer signs a promissory note to the seller for part of the price, with agreed payments, interest and maturity. The note is usually secured by business assets and is typically subordinate to the senior lender, meaning the bank or SBA lender is repaid first if there is a problem.
Why Winery Buyers and Sellers Use Seller Financing
- Financing gaps: when appraised value or cash flow does not support the full price
- Wine inventory: some sellers accept payment for aging wine as it is sold
- Transition support: a seller with money still owed has a reason to help with staff, club members, distributors and growers
- Seller confidence: willingness to carry a note may signal confidence in the business
Earnouts
An earnout makes part of the price depend on results after closing, such as club retention, sales or wholesale performance. Earnouts can help when parties disagree about future performance, but they can also create disputes about how results are measured, particularly when weather or harvest conditions affect outcomes. Some lenders and programs limit earnouts or do not allow them, so buyers should discuss any earnout with their lender early.
Seller Notes in SBA Transactions
Seller notes can appear in SBA-backed transactions, but program rules may affect their terms, including whether payments can be made during certain periods and whether the note can count toward the buyer’s equity. See our article on SBA loans for wineries.
Terms to Negotiate
- Amount, interest rate, payment schedule and maturity
- Security and subordination to the senior lender
- Any offset rights if the seller’s representations prove inaccurate
- Seller consulting or transition duties and how they relate to the note
- What happens if the business is sold again or refinanced
How Seller Financing Affects Price and Value
Seller financing can change how buyers and sellers view the price, since deferred payments carry risk for the seller. Our guide to winery valuation explains how deal terms and price interact.
Seller Involvement After Closing
Where the seller is also the winemaker, a note may be paired with a consulting period. Some loan programs limit how long a seller may stay involved, so these arrangements should be discussed with the lender. See our article on winemaker retention.
What Lenders Want to See
Senior lenders will review the seller note’s terms and require that it fit their structure. Our article on winery loan requirements explains the broader review.
For Sellers
Sellers considering a note should evaluate the buyer’s experience and the business’s ability to support all payments. See our guide on how to sell a winery.
US Professional Funding helps buyers finance the acquisition of existing, operating wineries, including transactions that combine senior financing with a seller note. Learn more about our winery and vineyard acquisition financing.
