The balance of sale price is today one of the most strategic levers for buying or selling a business in Quebec. It is at the heart of many SME transactions, particularly in the service, manufacturing, distribution, and local trade sectors.

Little known to the general public, it nevertheless raises many questions:

• What is the exact definition of sales price balance?

• How to structure it?

• What are the tax impacts?

• Is it risky?

• Is it accepted by banks and lenders?

This guide answers all these questions in depth and gives you the concrete tools to structure a secure and viable transaction .

What is a sales price balance? (Simple and clear definition)

The balance of sale price , sometimes referred to simply as “balance of sale,” is a portion of the sale price of a business that the seller agrees to receive later , after the sale agreement has been signed.

In other words, the seller partially finances his own sale , often over a period of 1 to 5 years. The payment is therefore split : one part at closing, and another at maturity.

It is a seller's credit , with or without interest, which is based on a relationship of trust and a well-structured agreement.

Why use a sales price balance?

For the buyer:

• Reduces initial financing pressure

• Makes the project financeable , even with a limited down payment

• Demonstrates the seller's commitment to the success of the transfer

• Facilitates the negotiation of a better package with banks

For the seller:

• Allows you to close a sale faster

• Increases the price obtained in exchange for a deferred payment

• Offers potential tax benefits (capital gain averaging)

• Makes your business accessible to a wider pool of buyers

Detailed operation of a sales balance

The balance is entered in the purchase-sale contract and specifies:

• The deferred amount : generally between 10% and 40% of the sale price

• Payment term : often 12 to 60 months

• The interest rate (often 3 to 6%, sometimes 0%)

• Repayment method : fixed monthly payments, staggered payments or single payment

• The conditions for termination or penalty

• Guarantees granted to the seller (movable mortgage, personal guarantee, retention of title, etc.)

Numerical example of a sales price balance

Total sale price: $600,000

• Initial payment at signing: $400,000

  (financed by the bank + down payment)

• Sales balance: $200,000 over 3 years

  → Annual payments of $66,666 + 4% interest

This represents a mixed arrangement , where the bank agrees to lend because the seller remains involved and the risk is shared.

Types of sales price scales

Taxation: How is the balance of sale price taxed?

For the seller:

The balance may allow for a spreading of the capital gain if:

• The business is sold by a natural person (not a corporation)

• The price is paid over more than a year

• The spreading clause is documented and complies with tax requirements

This allows taxable income to be spread over several years , thereby reducing the overall tax rate.

For the buyer:

Balance payments are not deductible . They are part of the total acquisition cost of the business, as if they had been paid in one lump sum.

Link between sales balance and bank financing

Commercial banks (Desjardins, BNC, RBC, etc.) highly value balances . Why?

Because they:

• Reduce overall risk

• Prove that the seller believes in the viability of his business

• Alleviate pressure on the buyer, increasing the chances of repayment

Institutions such as BDC , Investissement Québec , PME MTL , and SADCs often consider the balance as a form of quasi-capital in their risk calculation.

The Risks Associated with a Sales Balance (and How to Manage Them)

For the seller:

• Risk of default if the buyer does not pay

• Complexity of recovery if there are no guarantees

• Dependence on good company performance after departure

For the buyer:

• Repayment pressure in addition to bank obligations

• Termination clause in the event of breach

• Limits borrowing capacity for other projects

How to reduce them?

• Structure the clause in the contract well

• Require (or offer) reasonable guarantees

• Plan for a transition period with support

• Use an external appraisal to set a fair price

Timeline for integrating a balance into a transaction

Legal models available on trnsfr

Balance of Sale Price: What Lenders Look For

Lenders want to see:

• A balance documented in the offer

• A realistic timetable

• Performance-related conditions or guarantees

• A purchase price justified by a market valuation

Use our business valuation AI to justify your setup to institutions.

In summary: why use a sales price scale?

The sales price balance is:

• A smart complementary financing mechanism

• A proof of mutual trust between seller and buyer

• A powerful negotiation tool for a successful business takeover

But it must be legally framed , integrated into a balanced financial package , and based on a fair assessment .

Useful articles to consult:

• Guide to sales multiples by sector

• Financing for the purchase of a business in Quebec

• Prepare for sale before retirement