Deferred payment makes your debt worse
A retention of part of the purchase price usually arises where there is a concern by the buyer that he will not retain certain key clients or customers (or not retain an agreed overall annual sales value of clients) and that this will, consequently, reduce the business’s profitability.
For example, the purchaser could agree to buy the business subject to a retention of a part of the purchase price for a minimum of twelve months, with the funds to be held in trust by his solicitor for this period. These monies would be released to the seller if sales (or turnover) targets are achieved, or released pro rata if they are only partly achieved.
Deferred payment, or payment on terms, could be advantageous for the seller for all sorts of reasons, although it is likely that taxation will be the main reason why a seller could consider it. The potential taxation advantages of being paid over time need to be compared with the risk of not being paid in full; the pros and cons could be very similar to those for vendor finance. You would need expert advice as to how your payments are likely to be treated by the taxation authorities (for example, as income or capital?) before you make any firm decisions in this area.
Loan notes are a way of delaying the receipt of consideration. The issues you need to consider are the date of redemption, whether the payment is guaranteed (and the strength of the guarantee) and the rate and frequency of interest payments. This is a complex area and you should obtain expert taxation advice before agreeing to receive any payment in this way.